GST council to consider repeat taxation concern on online gaming

The GST council is set to meet on August 02 to discuss the implementation of GST on online gaming and decide whether the 28% tax will be levied on deposits or every game, with concerns raised about the potential for repeated taxation.

GST Council Meeting on Online Gaming Taxation Concerns Holds Promise for Industry Growth

The upcoming GST council meeting on August 02 holds immense potential for resolving the taxation concerns surrounding online gaming in India. With industry stakeholders, investors, and gamers raising valid points about the potential negative impact of imposing a 28% GST on every game, it is encouraging to see the government taking these concerns into consideration and actively seeking a viable solution.

The Revenue Secretary’s acknowledgment of the potential for repeated taxation on the same rupee and the resulting high effective tax rate of 50%-70% demonstrates a willingness to address the industry’s concerns. This recognition is crucial to ensuring the sustainability and viability of the online gaming sector, which has shown remarkable growth and potential in recent years.

The letter sent by over 30 global and Indian investors to the Prime Minister’s Office highlights the cascading effect and the burden of an effective taxation rate of 50%-70%, which could render the industry unviable. Such concerns, expressed by industry experts and investors, require careful consideration from the GST council to avoid any potential negative consequences.

Dr. Deepali Pant’s perspective on raising the GST rate from 18% to 28% being reasonable in the context of many other industries, including the entertainment sector, paying the same rate, offers a balanced viewpoint. However, the issue lies not in the uniform levy but in the change from taxing platform fees or commissions to full-face value of every game. This valid concern emphasizes the need to strike a fair balance between industry growth and tax revenue generation.

The comparison made by former Chairman of the Competition Commission of India, Mr. Dhanendra Kumar, between online gaming and casinos in terms of taxation is thought-provoking. While online gaming is currently slated for a 28% GST on every game, casinos are taxed on deposits with no further taxation on winnings. This disparity raises questions about the fairness and potential dampening effect on the online gaming industry.

The magnitude of the impact of levying a 28% GST on every game is evident in the potential increase of more than 1,000% in GST liability and the subsequent negative implications for Indian gaming startups and employment. The loss of over 50,000 high-skilled jobs and burdening Indian gamers with an extra tax would significantly hinder the growth and potential of the industry.

Moreover, if the GST is levied on Comprehensive Economic Assistance (CEA) instead of deposits, it could have detrimental effects on GST collections and overall tax revenue. This potential reduction in collections and write-offs of foreign investments and enterprise value further accentuates the need for a careful and comprehensive approach to online gaming taxation.

In conclusion, the upcoming GST council meeting provides an opportune moment for the government to address the legitimate concerns surrounding online gaming taxation. A balanced approach that ensures the industry’s sustainability and growth while also generating tax revenue is essential. By considering the potential consequences and finding a fair and viable solution, the government can unlock the tremendous potential of the online gaming sector, leading to continued job creation, economic growth, and enhanced gaming experiences for millions of Indian gamers.