Ahead of the 50th GST Council meeting, the eSports Players Welfare Association (EPWA) has shared a report on the booming industry of virtual games as the Group of Ministers on Tuesday is likely to include online gaming under the ambit of 28% GST slab. The GST Council has proposed to levy GST at 28% on total money deposited by the players to a gaming company as against the GST rate of 18% levied only on the platform fee.
Against this backdrop, the EPWA director and Tech Policy lawyer Shivani Jha told Mint, “We hope that the council of ministers will take equitable steps to ensure an increased GST doesn’t discourage players from playing altogether. Gamers must not be taxed the same way as Gamblers”.
According to a report by the eSports body, the Indian online gaming industry is growing annually at a rate of 30% and is one of the fastest-growing segments within the media and entertainment sector. As of May 2022, the country accounted for 19.2% of worldwide game downloads. The compound annual growth rate of the gaming industry is of approx 22%. In 2021 India recorded about 390 million online gamers.
Effects of 28% GST on online gaming companies:
As per the EPWA survey, if policymakers increase the GST on online gaming, 61 out of 100 online gamers might discontinue playing online games.
“Online gaming is a profession for some of us, an increased GST is a deterrent. Our investments in buying equipment also don’t give us any input credit, and now the proposed regime seems harsh.” Zerah a professional gamer and CEO of Lxg told Mint.
The proposed changes in tax rate will increase the financial burden on the gaming industry as they will become liable to pay tax on those portions of the money as well, which does not in any manner contribute to generating revenue for these companies, the report added.
EWA recommended that policymakers should refrain from charging GST on the entire money and continue
charging GST only on the Gross Gaming Revenue (GGR). The legislation should acknowledge that money won from online gaming is not a mere matter of chance but the gamer’s skill.
Citing, the High Court of Karnataka in Gameskraft Technologies Private Limited v. Directorate General of Goods Services Tax Intelligence on 17 May 2023, the EPWA said, “There should be a clear distinction between online gaming on one hand and lottery, betting, gambling and casino on the other. The legislature should refrain from putting them under a single umbrella.
Karnataka High Court held that online rummy differs from betting, gambling, lottery, and betting. Moreover, the prize pool money is an actionable claim, and GST shall be charged only on contest entry fees at 18%.
The Gaming Industry believes that higher taxation may reduce the attractiveness of online skill-based gaming and can even impact Foreign Direct Investment inflows, existing employment as well as
future employment opportunities, investment in marketing and Information Technology services, and ancillary industries.
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Updated: 11 Jul 2023, 01:13 PM IST
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