Online gaming companies await clarity as recurrence taxation worries rise.
As they await full notice from the GST Council’s legislation committee, which has imposed a 28% goods and services tax on the business, online gaming firms are concerned that possible recurrent taxation might be a death blow.
According to industry experts, this may result in a 50-60% indirect tax burden on gamers since most of them utilize their winnings to play another game, which would be taxed again, and so on.
“Every stakeholder has brought this up. “We believe that levying GST on the face value of each game will have a significant impact on user engagement with the platform,” said Roland Landers, CEO of the All India Gaming Federation, which represents firms such as Mobile Premier League, Zupee, and Gameskraft.
“It will raise the cost of each game and may drive unsuspecting users to illegal offshore gambling websites,” he told ET. “Additionally, this will make the business of Indian online gaming companies unviable, resulting in a loss of investment for investors,” Landers stated.
Businesses have expressed their worries to government authorities.
“We are aware of the industry’s concerns and will make every effort to keep it simple and less complicated,” a senior finance ministry official told ET. “
Some industry representatives have stated that this will make taxation for online gaming higher than for casinos,” the source added. After the hike in GST, Indian gambling industries expect thousands of job losses. The GST Council approved last week a 28% GST on the revenue of online gambling, casinos, and horse racing enterprises.
The tax at casinos will be on the admission ticket regardless of how much customers spend, however in the case of online gaming enterprises, the entry price will be added to the firm’s turnover every time a user joins a tournament.
According to the official
The common consensus is that the tax should be based on the number of times a user plays. According to a gaming industry executive, recurring taxing violates the GST premise, which is intended to be a streamlined indirect tax structure. Only unlawful sites, according to online gambling businesses, would benefit from the 28% GST.
“This could affect players’ net winnings and drive them away from legal platforms that offer better returns,” the individual added on the condition of anonymity. At the moment, there are an estimated 400 million internet gamers in India.
Rajeev Chandrasekhar, Minister of State – the GST Council rethink the 28% tax on internet gaming
“Generally, users do not take their wins from the first contest and go home… “They usually re-enter new contests with their winnings,” claimed another industry source. “If the levy occurs multiple times on the same deposit amount, players may end up losing money even if they have a high winning rate.” Will recommend that the GST Council rethink the 28% tax on internet gaming: Rajeev Chandrasekhar, Minister of State
Users of card games and fantasy sports, on average, play at least three times with their earnings.
Now, if a player deposits Rs 100, of which Rs 22 is tax (28% of Rs 78), and assumes a platform fee of Rs 12 (15% of Rs 78), and wins back their initial pot money of Rs 66, and decides to play again, another Rs 18 of tax (28% of Rs 66) will be levied, bringing the total tax to Rs 40, and so on.
“We recognise the government’s position that every transaction must be taxed, and we assist the government in its tax collecting efforts…”However, because the same rupee is used repeatedly in gaming, you end up taxing the same rupee repeatedly,” a senior executive of an online gaming corporation said.
Executives from real-money gambling businesses want to meet with government authorities.
“So, what is really a 28% tax on entry fees ends up being a 50-60% tax on player money, depending on how much players are able to play and depending on game to game and platform to platform,” said the anonymous source. This might be a larger hit than the business anticipated, given that the 28% tax is only imposed once.
“We are content to pay 28% tax on full value, and it is understood that a reassessment is unlikely to occur anytime soon…”However, the repetitive element only tells players to participate in fewer contests,” a third gaming industry official said.
Questions made to industry organisations E-Gaming Federation (EGF) and Federation of India Fantasy Sports (FIFS) received no response as of Wednesday press time.
