Online gaming industry opposes 28% tax bracket; demands 18% GST

The online gaming industry has made a pitch to the government against raising GST rates to protect the industry from degrowth. Multiple industry experts have demanded the continuation of 18% GST on online gaming, opposing the clubbing of the industry in the 28% bracket along with racing, gambling and betting. The step was taken after the Group of Ministers (GoM) tasked by the GST Council met to look into matters related to the GST regime covering online gaming, casinos and race courses. As per data, the online gaming industry has potential to generate revenue and employment opportunities in near future, and a proposal to levy GST on 28% of the entry fee and 115 % surcharge instead of platform fee /gross gaming revenue (GGR) will make the industry commercially unviable.

The international online gaming industry tax structures in countries such as the USA, UK, Australia and Germany, highlights how they levy tax on GGR at a rate between 15-20%, Gopal Jain, senior advocate, Supreme Court of India, said, “We’ve seen internationally that markets which started taxing the prize pool instead of the GGR have had to revert back to taxing only to GGR as it resulted in non-compliance, revenue leakage and grey markets,” he added.

Advocating the need for levying tax on GGR alone, the online gaming industry has maintained that taxing on GGR instead of the prize pool has proven to increase tax revenue in the long term. And with international learnings also indicating the same, several recommendations have been sent to the GST council, ahead of the scheduled meeting, to plug revenue leakage by preventing shift of the business to the grey market and discourage non-compliance with a prevalent global practice.

For Rameesh Kailasam, chief executive officer, IndiaTech.Org, the potential of the online gaming industry in India needs to be tapped rightfully. “It is necessary that games involving skill should ideally be taxed at 18% on the platform fee. The GoM should ideally take a positive view and recommend continuance of the current practice of considering the platform fee/GGR as value of supply. Since online skill-based gaming is not gambling or betting or wagering, a clarification needs to be issued to resolve litigation and provide relief to the industry,” he opined.

“A higher tax burden will make the industry unviable, and online gaming platforms have appealed to the government on numerous occasions to not treat skill based online games same as gambling while sharing a case in point on how a different and rational tax treatment of online skill based games can help in eliminating non-compliance, leakage of revenue and grey markets,” S Krishnan, advocate, sports law and taxation, highlighted.

Experts believe that the industry will suffer significantly if the current taxation regime is changed. In addition, transactions on online gaming platforms are 100% digital and they have a significant contribution to ‘digital India’. Moreover, the online gaming industry is believed to play a role in taking the startup spirit in the country to the next level and further boost India’s AVGC sector. Additionally, if uncertainty in policy-making and taxation for skill-based online gaming are resolved, the industry can attract increased FDI and growth, therefore enhancing consumer interest and tax revenue. It can help the government in the long term and make India a dominant global force in AVGC, according to the experts.

According to a 2021 report by BCG and Sequoia on the Indian mobile gaming market, the Indian online gaming industry is expected to triple to around $5 billion market opportunity by 2025. Gaming is a $1.8 billion sunrise sector in India and is still relatively small (1% of global), but it is growing (38% CAGR). According to the recent FIFS-Deloitte report, fantasy sports has the potential to attract Rs 15,000 crore of FDI in the next three years.

SOURCE:https://www.financialexpress.com/brandwagon/online-gaming-industry-opposes-28-bracket-demands-18-gst/2515733/

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