Govt’s Tax Revenue Rises To 6,909 Cr From Online Gaming: Finance Minister Sitharaman

After the GST Council meeting on Monday, Finance Minister Nirmala Sitharaman said that revenue from the increased tax on online gaming has surged by 412 per cent, reaching Rs 6,909 crore over the past six months. She also said that a 30 per cent increase in casino revenues.

In July 2023, online games, both skill-based and chance-based, were moved to the 28 per cent GST bracket during the 50th GST meeting. This change took effect on 1 October 2023, up from the previous 18 per cent tax on skill-based games.

In addition to this, winnings from gaming tournaments, whether in cash or prizes, are taxed at 30 per cent under 'Income from Other Sources' according to income tax laws.

Prime Minister Narendra Modi recently highlighted India’s potential in the gaming sector during his Independence Day speech, emphasising the opportunity to develop domestic talent and reduce reliance on foreign game producers.

However, reports suggest the industry has faced difficulties following the GST hike. A study by EY and a survey by USISPF indicate that the tax increase has negatively impacted the industry, with many companies struggling to secure funding, maintain profit margins, and achieve revenue growth. Just 42 per cent of surveyed companies reported revenue growth of up to 25 per cent, while 58 per cent experienced revenue stagnation or declines, with some reporting a 50 per cent drop. This marks a significant departure from previous rapid growth trends and underscores the financial strain caused by the higher GST rates.

The increased GST burden has led to reduced profit margins, workforce cuts, including layoffs and hiring freezes and in some cases, complete shutdowns of operations.

To address these issues, many gaming companies have proposed adjustments to the GST valuation method, suggesting a ‘net deposit’ model (based on GGR/platform fees) or reducing the total withdrawals from deposits for GST calculation purposes.

Since the GST was introduced for online gaming in 2017, companies have paid an 18 per cent tax until October 2023. The GST department’s recent decision to impose a 28 per cent tax retroactively on games played from August 2017 to October 2023 has complicated matters, with 71 companies receiving notices demanding a total of Rs 1.12 lakh crore in taxes, sometimes exceeding their annual revenue.

India, with 442 million gamers, is the second largest market globally after China. The industry, valued at USD 3.1 billion, is projected to grow to USD 8.92 billion in the next five years.