At its 50th meeting on Tuesday, the Goods and Services Tax (GST) Board announced a 28% tax on online gambling, casinos and horse racing, at full face value. According to Finance Minister Nirmala Sitharaman, the council does not intend to “terminate an industry”, but there have been discussions of the “moral question” posed by the online gambling sector.
The Minister said after the meeting: “Our program is not to end an industry, all types of businesses must operate. There was a discussion about the moral issue that on the one hand you don’t want to end an industry. But that doesn’t mean you give them more incentives than essential goods. All states participated in this decision which has been pending for 2-3 years. We could make the decision today because every state clearly participated in it.
GST will be applicable on the total value of bets placed or on the total amount of consideration paid.
Notably, Sitharaman asserted that the online gambling tax will be applied regardless of skill-based games or luck-based games.
She clarified: “We will always align ourselves with what MeitY wants to bring as regulations. There will be an amendment to Schedule III of the GST Act and we will add online gambling to the list of actionable claims where item number 6 clearly states that betting, gambling and lotteries are already there. We will also include online games and horse racing. Consequently, they will be taxable on their full face value at 28%”.
GST on online games: How the industry is responding
The country’s gambling industry did not take the GST announcement in a positive light.
According to Shivani Jha, technology policy lawyer and director of the E-Gamers and Players Welfare Association (EPWA), the decision “will not only discourage gamers from playing, but professionals for whom it is a livelihood will be burdened. of taxes”.
“This development indicates an increase of Rs 1.8 per Rs 100 spent on a game to Rs 28 per 100. It may also force them to play on offshore platforms, and the whole vision of creating a progressive digital game ecosystem seems blurred. at this stage. “, added Jha.
Even BharatPe founder and famous ex-Shark Tank investor Ashneer Grover took to Twitter to share his thoughts. “It was great fun being a part of the fantasy game industry – which is being murdered now. $10 billion out the window during this monsoon,” Grover tweeted.
RIP – Real money gambling industry in India. If the government thinks people will put ₹100 to play on a pot entry of ₹72 (28% gross GST); and if they earn ₹54 (after platform fee) – they will pay 30% TDS on it – for which they will get a free pool in their living room come…
— Ashneer Grover (@Ashneer_Grover) July 11, 2023
Soham Thacker, founder and CEO of tournament platform Esports Gamerji, said the announcement will impact on multiple levels – including user base, revenue and investor sentiment – for cash games. real (RMG) and non-RMG titles because “no distinction was made”. do.”
Thacker added, “For non-RMG businesses like ours, we expect a slight impact on subscription revenue. Currently, on our platform, we charge 18% GST on the total subscription cost, which now increases to 28%, making it more expensive for users to access the platform. So, in the short term, it is likely that some companies will absorb this impact to a large extent, which will affect their revenue or consider increasing the cost of subscription. Many gaming companies, in order to limit the impact on the investor side, may choose to relocate their operations outside of India, making this geography their secondary market.
According to Sagar Nair, co-founder and CEO of the gaming-focused social networking platform, the decision will have a “significant impact on the online gaming industry, which unfortunately includes the esports community.”
He added: “While we understand that the government needs to impose such measures on casinos, horse racing and gambling, the higher tax rate is not justified for the competitive gambling community. This may discourage new players from entering the market, as their hard-earned income from their efforts, just like traditional athletes, will be taxed at the same level as those involved in gambling and other similar practices.
“Once again, esports being included in the same domain as online gaming, horse racing and casinos has put our industry at a disadvantage,” said Rohit Agarwal, founder and director of the focused marketing company. on Alpha Zegus games.
“While the government may have valid reasons for imposing a higher GST on horse racing and casino winnings, imposing the same rules on an industry like esports doesn’t seem fair. Esports doesn’t have not just a chance to base the “win or lose” situation, but has a very big element of skill that determines the outcome of the game. It’s not what I expected, and our fight to separate the esports from other labels continues.