A group of ministers (GoM) has recommended raising the goods and services tax (GST) on online gaming from 18% to 28%, to bring the skill game tax rate on a par with chance games involving gambling and betting, sources said.
However, it was not immediately clear whether the enhanced GST rate would be on the full contest entry amount (platform fee and prize pool) or only on the platform fee. A member of the GoM told FE that it may be levied on the “initial gaming amount”, but he did not elaborate.
A gaming industry representative said the concept of the initial gaming amount could lead to disputes, as the initial amount can be lowered to a bare minimum (Rs 1 or Rs10) while the subsequent amounts could be raised to Rs 1 crore.
Online gaming is taxed at 18% of the platform fee, which works out to 5-20% of the contest entry amount. The gaming industry has been urging the government to keep the online gaming tax rate at 18% to promote the industry.
Currently, chance gaming such as racing, betting and lotteries are taxed at 28% of the contest entry amount (platform fee and prize pool).
The GoM on taxation of casinos, race courses and online gaming led by Meghalaya chief minister Conrad Sangma met in Delhi on Wednesday, to finalise its recommendations on streamlining taxation of online gaming, which has an annual turnover of Rs 30,000 crore.
“The GoM on casinos, race courses & online gaming has come to a consensus. The report of our submissions will be handed over to Hon’ble FM, Smti. @nsitharaman Ji in a day or two & the matter will be presented in the next @GST_Council Meeting,” Sangma tweeted.
The parity in taxation of online gaming and chance gaming may require amendments to the GST laws, analysts say.
Industry body IndiaTech.org has recommended that only gross gaming revenue ( GGR or platform fee) alone should continue to be considered as the value of supply, as per current practice. Additionally, if there are other formats/revenue models followed by platforms such as subscription fee, in-game revenue, etc, in such cases GST should be applicable. “It is pertinent to note that the technology platform owner has no right, title or interest over the prize pool amount,” said Rameesh Kailasam, CEO, IndiaTech.Org.
“IndiatTech.org has been recommending that games involving predominance of skill should ideally be taxed at 18% on the platform fee as applicable for entry HS Code 998439 as ‘other online content not elsewhere classified (NEC)’. Higher tax rates will adversely impact the growth of the industry. Leading global regulated markets including the UK, most countries in the EU and Nevada, New Jersey in the US, tax on GGR at the rate of 15% to 20%. In the year 2000, the UK moved from a 6.5% tax on stakes to a 15% tax on GGR, creating over the next 18 years the largest and most sustainable gaming market in the world,” Kailasam said.