Gaming Industry Divided On Tax Formula Before GST Council’s Meet

Before the GST Council’s meeting on August 2 to discuss the 28% tax on real-money gaming at full face value, the online gaming companies have started seeing a difference of opinion on the matter.

For 28% GST, some large gaming companies are now ready to accept the proposed tax but they want the GST to be applicable on the value of deposits made by players to avoid repetitive taxation.

On the other hand, smaller companies want the tax to be levied on the gross gaming revenue, ET reported.

It is to be noted that the entire industry was batting for GST on gross gaming revenue after the GST Council decided to impose a 28% tax on the full face value for real-money gaming platforms.

Moreover, the GST council did not outline any distinction between games of skill and games of chance. Earlier, only 18% GST was applicable on the platform fee charged for games of skill.

As per the report, some gaming firms are of the view that it is not practical to seek GST on gross gaming revenue. However, some companies are looking for a reconsideration. The difference within the industry has emerged at a time when the gaming industry is looking at making a final representation to the government before the GST Council’s upcoming meeting on Wednesday.

The issue was debated last week at a meeting of the All India Gaming Federation (AIGF). While the federation wrote a letter proposing to divide online gaming into ‘large-size tournaments’ and ‘quick continuous games’, the proposal caused an uproar during that meeting.

Initially, the gaming industry unilaterally criticised the GST decision, saying it would make the entire sector disappear as 28% tax would impact the smaller startups drastically, besides impacting revenue of larger firms.

Days after the last meeting of the GST Council, a group of over 100 gaming startups and a few industry federations wrote a letter to the government asking it to reconsider the decision of charging 28% GST on the sector on full value.

Later, as many as 30 domestic and Indian investors, including Kalaari Capital, Peak XV Partners, Orios Venture Partners, Tiger Global Management, Alpha Wave Global, and Steadview Capital, wrote to the Prime Minister’s Office to reconsider the decision.

Meanwhile, a group of 45 gaming studios also wrote to the Prime Minister’s Office, the Ministry of Electronics and Information Technology and the Ministry of Information and Broadcasting, seeking a clear distinction between video games and real-money gaming.