28% GST Only On Gross Gaming Revenue Will Better Suit The Industry: AIGF CEO

While all eyes are on the yet to be finalised goods and services tax (GST) rate on online gaming, the GST council’s Group of Ministers (GoM) is likely to impose a 28% tax on gross gaming revenue (GGR), as per reports.

Although the final recommendations are still awaited, the 28% GST only on GGR rather than imposing a blanket 28% GST on online gaming will be a big boost for the industry, said All India Gaming Federation CEO Roland Landers, in a conversation with Inc42.

Earlier, the GoM had recommended that in the case of online gaming, the activities should be taxed at 28% on the full value of the consideration, including the contest entry fee paid by the player for participation in such games. Currently, the GST rate for online gaming is at 18%, whereas it is at 0% on contest entry fee.

The recommendation to impose a blanket 28% GST on online gaming alarmed the industry. As industry stakeholders feared the steep GST rate on the entire face value in an online game can make the businesses viable, they also warned that it would lead to a rise in the gray markets.

However, the GoM has been responsive to the stakeholder concerns and has adopted an open, transparent, and consultative approach, Landers added.

“Our (AIGF) only request has been to charge GST on the Gross Gaming Revenue, which is the practice that has always been followed and is also globally accepted,” he said.

For the uninitiated, gross gaming revenue is the revenue generated by platforms after the prize pool is deducted.

According to Landers, GST on the whole of contest entry amount or face value might push the nascent skill gaming industry into despair. Hence, most companies will not be able to recover and will shut down.

The GoM, led by Meghalaya CM Conrad Sangama, is expected to submit their final report next month. During the GST Council’s 47th meeting in June, the decision on levying 28% GST on casinos, online gaming, and lottery was deferred as the issue needed more discussion.

Earlier this month, the Internet and Mobile Association of India (IAMAI) appealed to the government and the GST Council to maintain the status quo on the online games of skill industry.

It must be noted that the GoM also recommended that no distinction should be made between games of skill or chance for levying 28% GST. “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 online gaming segment in the country reached INR 101 Bn in 2021 with a 28% growth, as per a FICCI-EY report. More importantly, the number of online gamers grew to 390 Mn in 2021 from 360 Mn in 2020.