FP StaffNov 22, 2022 14:23:48 IST
The Indian government is likely to tax online gaming at the rate of 28 per cent under Goods and Services Tax, instead of the current 18 per cent. It is also likely to suggest a new, revised formula for calculating the amount on which the GST would be levied.
The Indian government has finally decided that online gaming essentially falls under the category of ‘demerit goods’ and hence should attract a 28 per cent GST. Image Credit: Pexels
At present online gaming attracts 18 per cent GST, with the tax being levied only on gross gaming revenue, which is the fees charged by online gaming portals.
The Group of Ministers (GoM), chaired by Meghalaya Chief Minister Conrad Sangma, had in its earlier report submitted to the Council in June suggested a 28 per cent GST on the entire value of the money that a player or a customer puts up, including contest entry fee, without making a distinction such as games of skill or chance. However, the Council had asked the GoM to reconsider its report.
Following that the GoM took the views of the Attorney General and also met stakeholders from the online gaming industry.
Although the GoM deliberated on separate scopes and definitions for ‘games of skill’ and ‘games of chance’, and on what basis can certain games be classified as games of skill or games of chance, it finally decided online gaming essentially falls under the category of ‘demerit goods’ and hence should attract a 28 per cent GST.
A “demerit good” basically is a good or service whose consumption is regarded unhealthy, demeaning, or otherwise socially inappropriate due to the perceived negative impacts on the consumers themself”.
The GoM report in June suggested that the GST should be levied on the entire amount received from the players.
Charging 28 per cent GST on the entire amount, which a player deposits for a game for both categories of online game, would reduce the prize money left for distribution and drive away players. This may also encourage online gamers towards unlawful portals that do not deduct tax, sector experts had said. Industry insiders fear that a higher rate of tax that too on the entire amount that players deposit would mean the death of the industry in India as we know it.
Online gaming saw a major jump in users during the Covid lockdown. As per a KPMG report, the online gaming sector would grow to Rs 29,000 crore by 2024-25 from Rs 13,600 crore in 2021.
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