SUMMARY
The panel of state finance ministers could introduce a revised formula for calculating the amount on which the GST would be levied
The group of ministers is expected to soon submit its report to the GST Council for consideration
Earlier this year, the GST Council urged the GoM to reconsider its report which recommended levy of 28% GST on gross sales value
Irrespective of the classification between the games of skill and the games of chance, the panel of state finance ministers may recommend levying a uniform Goods and Services Tax (GST) of 28% on online gaming.
However, it could introduce a revised formula for calculating the amount on which the GST would be levied, news agency PTI reported.
A report by the group of ministers (GoM) will be submitted to the GST Council soon for consideration.
Earlier this year, the GoM, under Meghalaya Chief Minister Conrad Sangma, recommended the GST Council to levy 28% GST on gross sales value. Following this, the Council requested the GoM to reconsider its report. Meanwhile, the industry experts also called for a distinction between the games of skill and the games of chance.
The Law Committee under the GST Council suggested clearly defining and classifying the games of chance and the games of skill before taking any decision on taxation.
While the GoM deliberated on separate definitions, it finally decided to tax both as demerit goods, attracting a 28% GST. However, the GoM may provide some relaxation in valuation methods, the PTI report said.
Currently, a tax rate of 18% is levied on the commission collected by online gaming platforms for games not involving betting or gambling, whereas it is nil for contest entry fee (CEF).
The GoM was constituted last year to examine the issue of valuation of services provided by casinos, race courses, and online gaming and whether any changes were required in the legal provisions to adopt any better means of valuation of these services.
The panel’s decision could irk the gaming industry which has been calling for a clear distinction between the games of chance and the games of skill for a long time.
Online gamers in India grew to about 400 Mn by mid-2020 from about 250 Mn in 2018, making the country the second-largest base of online gamers after China, as per a KPMG report.
According to another report by FICCI-EY, Indian online gamers grew 8% to 390 million in 2021 from 360 Mn in 2020. The online gaming segment in India reached INR 101 Bn in 2021 with a 28% growth, the report said.
This has led to the emergence of a large number of gaming startups in the country over the last few years, including unicorns like MPL, Dream11, Games 24×7
According to Inc42 data, Indian gaming startups raised $344 Mn in funding in the first half of 2022.
