India’s digital revolution has paved the way for growth in the online skill gaming industry. The size of India’s gaming market is estimated at $2.6 billion in FY22 and is projected to reach $8.6 billion by FY27 as per Lakshmikumaran & Sridharan Attorneys recently released report analysing the recommendations of the Group of Ministers (GoM) on GST for online gaming.
The report suggests re-evaluating the initial Group of Ministers (GoM) report to reflect new laws and jurisprudence. It proposes determining the taxability of online games of skill based on their distinction from lottery, betting, gambling, and wagering, consistent with jurisprudence developed since the 1950s. Certifying ‘permissible online real money games’ under the IT Act and Rules is crucial for establishing a clear legal status. The report addresses the Union Finance Minister Nirmala Sitharaman’s remarks in South Korea, where she mentioned that the GST Council is considering taxation on online gaming, which could attract more investments once the tax framework is established.
Further, the report suggests aligning with global practices by taxing permissible online real money games based on Gross Gaming Revenue (GGR). Tax rates between 15-20% on GGR are recommended to generate higher tax revenue and adhere to international standards. It also proposes taxing online games based on GGR, aligning with global practices, suggesting setting tax rates between 15-20% on GGR, generating higher tax revenue.