The online gaming industry has welcomed the Good and Services Tax Council’s recommendation that ensures there won’t be repetitive taxation on gamers, but said the move to levy 28 per cent GST on the full face value will hurt the industry. The new rule is expected to be implemented from October 1.

The GST Council on Wednesday said tax will be applicable on the ‘amount paid or payable to or deposited with the supplier (of services), by or on behalf of the player (excluding the amount entered into games/ bets out of winnings of previous games/ bets) and not on the total value of each bet placed.

This ruling has clarified on repetitive taxation. However, it also clarified that 28 per cent GST would be levied on the full face value and not the gross gaming revenue (GGR) or the platform fee.

The Federation of Indian Fantasy Sports (FIFS) and E-Gaming Federation (EGF), which represents 50 Indian online gaming companies, including Dream11 and Games 24x7, said it ‘appreciates the government for addressing the industry’s concerns on the issue of repeat taxation.’

Also read: Adequate provisions exist to act against offshore gaming platforms evading GST: Finmin 

“The new tax framework, while clarifying and resolving uncertainty, will lead to a burdensome 350 per cent increase in GST, and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India,” it said in its statement.

Winzo Games co-founder Saumya Singh Rathore said in a statement the online skill gaming sector was not homogeneous ‘and has fairly diverse, nascent, and distinct business models that we request be evaluated more carefully.’

“The Online Skill Gaming sector is not a homogeneous category and has fairly diverse, nascent, and distinct business models that we request be evaluated more carefully. Taxing GST on deposits rather than the technology platform commission charged by the companies will make the unit economics unviable, wiping out 80 per cent of the industry, with fatality concentrated in MSMEs and Start-ups that house new-age business models,” said Saumya Singh Rathore, Co-founder, WinZO.

The All India Gaming Federation (AIGF) said this move will impact companies in their early growth stages, particularly the start-up and MSME sector, which will be disproportionately impacted.

Also read: Game on. Is tax regime for online gaming fair?

“We believe the decision by the GST Council of valuation on deposits will severely impact the online gaming sector and result in a situation where a majority of players, including the MSMEs, will no longer be able to survive in the face of the increased tax liability of 400-500 per cent. Only established and well entrenched skill gaming companies may be able to scrape through this change by using their existing capital reserves to counter the effects of substantially increased tax liability. However, even their revenues and valuations will significantly fall,” said AIGF.

AIGF represents companies such as Mobile Premier League, Gameskraft, Winzo Games, Zupee and others.

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