GST Council Defers 10% Hike On Online Gaming

The GST rate on casinos, race courses, and online gaming have been subject to much discussion amidst widespread pushback from the online gaming industry, in particular, on the government's recommendation of a blanket hike of Goods and Services Tax (GST) rates on casinos, racecourses, and online gaming from 18 percent to 28 percent.

Karnataka Chief Minister BS Bommai, a member of the Advisory Group of Ministers (GoM) on the issue has, however, announced that this decision has been deferred.

”The decision on online gaming has been deferred. There were issues that need to be discussed.", said  Karnataka Chief Minister, BS Bommai. "The GoM on online gaming has been given another 15 days,” he added.

Earlier, the three major gaming industry associations of India, E-Gaming Federation (EGF), All India Gaming Federation (AIGF), and Federation of Indian Fantasy Sports (FIFS) had all raised their concern over the proposed levying of tax on Full Contest Pool rather than on Gross Gaming Revenue (GGR), while suggesting that this could herald the demise of the online skill gaming industry in India.

A rise in tax rates on full contest prices could also mean that gaming companies are forced to charge more for their uses, leading to an inflated ecosystem

"A higher GST rate of 28% as against 18% would have an impact on the profitability and pricing of the online gamers, and many players may need to pass on these rate hikes to their loyal community of online gamers. It would be interesting to also understand the GoM’s recommendations on certain types of online gaming such as online learning games, trivia quizzes etc. which assist in education and distance learning.”

“Such a step is not only in dissonance with international best practices but is also violative of the principles of GST. Essentially, the online skill gaming operators are platforms, which bring players from various geographies together. The money pooled is eventually distributed to the winning player. The platform charges a predetermined fee, known as GGR, and pays tax on that. If you were to charge an increased tax rate on the entire quantum (pooled money plus commission), it is not only principally incorrect but will also annihilate this sunrise sector,” said Sameer Barde, CEO of EGF.

"Kenya had tried to impose a 20 percent excise tax on bet value a few years back but had to roll it back as most of the international licensed operators exited operations and the revenue collection was not as per expectation. Even a 0.25 percent excise tax on bet value imposed by USA is considered high by most companies, so a 28 percent tax on entry fee or bet value is almost like a killer blow," added Jay Satya.

It is expected that the industry will continue to push the council to reconsider the valuation of taxable amounts, in the case of online gaming.

"The GST Council's decision to ask the GoM to reconsider its report on online gaming, casino and race courses is a welcome decision. The narrow point that the GoM should reconsider is the method of valuation of online gaming services. In line with global practices, GST should be on the platform fee or commission retained by online gaming platforms and not the contest entry fee," said technology & gaming lawyer, Jay Sayta.

"The reconsideration by the GST Council is a positive move and hopefully, the revised report of the GoM will also favorably consider this aspect," said Soham Thacker, CEO & Founder Gamerji 

In case of Race Courses, GST will continue to be levied at the rate of 28 percent on the full value of bets pooled in the totalisator and placed with the bookmakers. Meanwhile, at casinos, GST will be applied at 28 percent on the full face value of the chips or coins purchased from the casino with no further GST applied on each round of betting including those played with winnings of previous rounds, GoM had said.