Currently, the GST rate for online skill gaming industry is 18% on the gross gaming revenue (GGR)
It would be against the letter and spirit of the Supreme Court’s judgement to equate games of skill with games of chance – gambling, betting or wagering: IAMAI
It also cautioned that an increase in GST would lead to further revenue leakages
As the goods and services tax (GST) on online gaming is likely to be finalised soon, Internet and Mobile Association of India (IAMAI) has appealed to the government and the GST Council to maintain status quo on the online games of skill industry.
The current rate of GST levied on the gross gaming revenue (GGR) of online skill gaming industry is 18%, whereas it is at 0% on contest entry fee (CEF). As per the IAMAI, this slab is legal, fair and in line with international taxation standards for this sector. Gross gaming revenue is the fee collected by an online gaming operator for providing its services.
In India, 28% GST is imposed on what is considered ‘sinful consumption’, the association added. It has also mentioned that the Supreme Court has ruled in various cases that games of skills are legitimate trades and, therefore, protected under Articles – 19(1)(g) and 14 of the Constitution.
“It would be against the letter and spirit of the Supreme Court’s judgement to equate games of skill with games of chance – gambling, betting or wagering,” IAMAI said.
The Group of Ministers (GoM) formed by the Ministry of Finance is meeting on Tuesday(July 12) to review the GST slab on online gaming, casinos and race courses. In last month’s GST Council meeting, the decision on imposing 28% GST on casinos, online gaming, and lottery was deferred as there were issues needed to be discussed.
IAMAI also said that online skills games provide the ‘most transparent mechanism’ for accounting GST. The nature of transactions being completely digital ensures there is almost zero leakage in revenue, it added.
Moreover, online games have paid a cumulative INR 6,000 Cr GST since the last four years and are likely to pay INR 16,000 Cr between 2022-2025, IAMAI emphasised.
“It is estimated that a major portion of this comes from online games of skill, given the transparent, measurable, and non-cash mechanism that this sector follows,” the association stated.
In 2021, the online gaming segment in the country reached INR 101 Bn in 2021 with a 28% growth, as per a FICCI-EY report. Further, real-money gaming comprised over 70% of segment revenues.
“Imposition of further 28% GST on GGR would increase the incidence of taxation to about 55%, which is patently unfair for an industry which is considered to be a legitimate trade – profession and not a game of chance,” IAMAI said.
It also reiterated that such a high tax slab would make it unviable for the vast majority of players (consumers), negatively impacting net GST collection from the sector. Globally, many jurisdictions in the EU, UK, US etc. levy tax only on the GGR, IAMAI noted.
“Unfortunately if 28% is imposed on the CEF – the incidence of GST shoots up nearly 10 times (1100%). Thus, it is very likely that the industry and GST revenue thereof will cease to exist,” the association stated.
It also cautioned that an increase in GST would lead to further revenue leakages and higher the chances of offline service providers going underground.
