Online gaming companies have reacted strongly to the imposition of 28 per cent GST on full value of online gaming and casinos, with them pointing out that this is a “killer blow” that forces the industry “into extinction”.

Offshore platforms are to gain at the cost of Indian online gaming companies. The GST will be levied on the gross revenue or total prize pool.

India’s online gaming industry is growing at $3 billion with more than 400 million users, at present.

According to Roland Landers, CEO, The All India Gaming Federation, the move is “unconstitutional, irrational and egregious” and holds online gaming at par with gambling activities.

“The decision will wipe out the entire online gaming industry and lead to lakhs of job losses. Only people benefiting will be anti-national, illegal offshore platforms,” he said.

Law firm Khaitan & Co’s Partner, Sudipta Bhattacharjee, said the tax imposition was “detrimental” and is completely against the vision of the government to promote online gaming.

“Findings of the Karnataka High Court in Gameskraft with respect to the distinction between a game of skill and a game of chance has not been appreciated. It will need to be seen if the prescribed methodology to tax online gaming will pass the test of Constitutionality,” Bhattacharjee said.

Aditya Shah, COO, IndiaPlays, said the higher tax burden will impact the cash flow and profitability of companies, limit their abilities to invest in research and business expansion (for want of funds). “It is now important for the industry to adapt and explore creative solutions to navigate these challenges,” he said.

Gamers Speak

Professional gamer Zerah said clubbing all online gaming in one category with horse racing and casino “doesn’t seem to be the intent of central ministries” and such high taxation will impact livelihood of gamers.

Shivani Jha, Tech Policy lawyer and Director, EPWA (E-gamers and Players Welfare Association), said this taxation will discourage players. “The whole vision of creating a digital progressing gaming ecosystem seems blurry at this point,” she said.

Possible rise in litigations

Ankur Gupta, Practice Leader – Indirect Tax at SW India, said, while the fine print is still awaited and also to know if there are some exceptions to the rule, the immediate impact of the decision could lead to notices being issued to online gaming companies “for differential tax” and a “new series of litigations”.

“In most countries, online gaming is taxable more or less at the current taxability of 18 per cent. Even on the valuation, the taxability seems to be on the face value and not on the margin or platform fee. Taxing the entire pool adversely impacts customers as they would get less playable value,” he said.

“This decision will have a chilling effect on the $2.5 billion of FDI already invested and jeopardise potentially any further FDI in the sector. Further, it will shift users to illegal betting platforms leading to user risk and loss of revenue for the government,” said Joy Bhattacharjya, Director-General, Federation of Indian Fantasy Sports (FIFS).