GST Council Imposes 28% Tax on Online Gaming, Horse Racing, Casinos
The Goods and Services Tax Council, in its 50th meet held in New Delhi on Tuesday, has decided to levy a 28% GST on online gaming, horse racing, and casinos at their full value. Union Finance Minister Nirmala Sitharaman announced this decision during a press conference following the council’s meeting.
Impact of 28% GST on Gaming
After the implementation of the new GST rates, every ₹100 spent on an online game will be subject to ₹28 in taxes. Shivani Jha, Tech Policy Lawyer and Director of EPWA (E-Gamers and Players Welfare Association), explains that this taxation will not only discourage players but also burden gaming professionals who rely on it as a livelihood. It may even drive them to offshore platforms, raising concerns about the growth of a digital gaming ecosystem in the country.
Responding to questions about the government’s intentions regarding online gaming, Finance Minister Sitharaman stated that the council does not aim to end any industry. However, lowering the tax rate for such industries to the level of essential goods might send the wrong message. The higher tax burden resulting from the 28% rate will indeed pose challenges to the gaming industry’s cash flows, hindering their ability to invest in innovation, research, and business expansion.
No Differentiation Based on Skill or Chance
The tax on e-gaming will be imposed without differentiating between skill-based and chance-based games. The Finance Minister clarified that the focus is solely on the value generated by these games, regardless of the skill or chance factor. The Ministry of Electronics and Information Technology (MeitY) is expected to provide a list of games for inclusion or exclusion, and the taxation approach will align with MeitY’s rules.
Aaditya Shah, Chief Operating Officer of IndiaPlays, highlights the importance of distinguishing between skill-based games and casinos/betting apps. Imposing a 28% tax rate without such differentiation not only hampers the capacity of online gaming platforms to develop new games and technologies but also undermines their competitiveness in the market. Constrained financial resources further limit their ability to enter new markets and reach a wider customer base.
The decision to impose a 28% GST on online gaming, horse racing, and casinos has sparked concerns within the industry. While the government aims to prevent sending the wrong message by lowering tax rates on these industries, industry experts worry about the impact on cash flows, innovation, and business expansion. The taxation approach does not differentiate between skill-based and chance-based games, focusing solely on the value generated. The Ministry of Electronics and Information Technology will play a role in determining the inclusion or exclusion of specific games.