Indiatech.org, an industry body representing tech start-ups has recommended to the GoM (Panel of State Ministers) constituted by the GST Council that GST should be applied only on platform charges charged by online skill-based games, Not the prize pool money on the total.
In real-money games, players have to pay an entry fee to join a gaming tournament and the total amount collected in the process is called prize pool money. This deposit is later distributed among the players as prize money and the company earns a percentage (4-20 per cent) as platform fee on this amount.
Different companies have different models of holding prize pool money. In some cases, the amount is received and held by a third party on behalf of the players and then this third party distributes the amount to the winners in accordance with the rules of the game. In other cases, the third party involved is actually a financial service provider like a bank or digital wallet that facilitates the transaction and charges a commission for it. “It is pertinent to note that the owner of the technology platform has no right, title or interest on the prize pool amount,” IndiaTech said.
This distinction is significant because in cases of lotteries, betting, gambling and horse racing, “100 per cent of the face value of the bet or the amount paid in the totalizer” is considered for GST.
Appropriate clarification should be issued that Rule 31A is not intended to cover games of skill and therefore is not applicable to any form of online gaming where skill predominates on the spot (thereby allowing online fantasy games as well as online skills). based casual games) and sports),” the industry body said.
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Further, the industry body mentioned that in cases where the revenue model of gaming companies includes subscription fees, in-game revenue, etc., GST should be applicable only on those received by the platform. He has also recommended that platform fee on skill-oriented games should be taxed at 18 per cent, as higher tax rates may affect the growth of the industry.
In August, the All India Gaming Federation (AIGF) and consulting firm EY also published their recommendations on the GST rate for online gaming in a report titled ‘Online Gaming in India – The GST Conundrum’.
Like IndiaTech, this joint report also suggested that the GST on the online gaming sector should be 18 per cent. The report also clarified that only platform fee would be considered for levying GST on online gaming platforms. “While most industry players have a platform fee in the range of 4 per cent to 20 per cent, any attempt to levy GST on the entire stake value will lead to instability of the business model and force businesses to shut down,” Joint report noted. “
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