Govt Justifies Online Gaming GST Move As Industry Laments 28% Tax

Days after the GST Council imposed a whopping 28% GST on online gaming, top government officials have justified the move in different ways.

Speaking at an event on Thursday (July 13), the Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said that while online gaming is an important segment, wagering and games of chance have increased cases of user harm and money laundering.

“The GST Council’s decision to levy taxes on online gaming is a well-thought-out preliminary measure,” Chandrasekhar added at the media event.

The MoS IT said the Ministry of Electronics and Information Technology (MeitY) will now seek considerations separately for the games of skills and for harmful games that involve wagering.

On Thursday, Revenue Secretary Sanjay Malhotra told Reuters the government believes the move serves a social and economic purpose if revenues fall. The GST panel took nearly two years to finalise the tax bracket for online gaming.

“Government believes social as well as economic purpose will be served as people will indulge in more productive activities if revenues (of online gaming companies) fall due to the new 28% tax,” said Malhotra. The revenue secretary also added that the ministers at the GST Council believed that online gaming is a social evil and should be discouraged.

On Tuesday (July 11), the government shocked the $1.5 Bn online gaming industry when it announced the tax. Further, despite the industry’s demands, the GST Council did not differentiate between skill and chance-based gaming for 28% tax.

The gaming industry, which has surged in popularity and attracted foreign investment, lambasted the move. Roland Landers, CEO of the All India Gaming Federation (AIGF), called the GST Council’s decision “unconstitutional, irrational, and egregious”.

“The decision ignores over 60 years of settled legal jurisprudence and lumps online gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms,” said Landers.

However, Malhotra rebuffed concerns that the tax would undermine foreign investment, triggering job losses. He said no government would promote an industry only for employment and investment if it is not in the public interest.

However, the government seems to be prepared to defend the GST move on online gaming, as calls for a review have been rebuffed so far. The officials have also said there is no need for further consultation with the online gaming industry.

Per a RedSeer report from earlier this month, fantasy gaming platforms in India saw a revenue of $342 Mn and 64 Mn users participating during this year’s edition of the Indian Premier League. The gaming industry has produced unicorns such as Dream11 and MPL.

To add to the fallout of the move, around 40 gaming companies are reportedly staring down the barrel of a tax demand worth INR 10,000 Cr.