GST on online gaming: Industry urges finance minister to reduce 28% tax

Online gamers' association on Tuesday requested finance minister Nirmala Sitharaman for a reduction of 28 per cent Goods and Services Tax (GST), saying high taxation would lead to mushrooming of illegal gaming firms.

Gamers from Tier II and Tier III cities under the aegis of 'Indian Gamers United' in an open letter to finance minister Nirmala Sitharaman said that high taxation will push the gamers towards illegal and offshore platforms where no tax is payable but will put the gamers into a very high risk.

The association also pitched for making a distinction between games of chance like gambling and games of skill like gaming.

Gaming is a skill-based activity and cannot be clubbed together with games of luck like gambling and horse racing so taxation requires a relook and making it tax friendly, 'Indian Gamers United’ said in a statement.

Since several of these games come with the option to earn monetary rewards, this is giving rise to a segment where young people are using their gaming skills to earn money in their free time and becoming part of the gig economy, it said.

An unviable rate of GST at the rate of 28 per cent on online games will have adverse impact on this growing industry, it said.

Meanwhile, the GST Council in its meeting on Wednesday will decide on modalities for implementing a 28 per cent Goods and Services Tax on online gaming, casino and horse racing.

In its 50th meeting earlier this month, the Council headed by finance minister Nirmala Sitharaman decided to levy the maximum 28 per cent tax on the full face value of bets in online gaming, casinos and horse racing.

The decision of the Council evoked criticism from the online gaming industry. Following this, minister of state for electronics and IT Rajeev Chandrasekhar said that the GST Council should reconsider its decision.

"We are still in the early stages of developing a sustainable and permissible online gaming framework. Once this framework is established, we will approach the GST Council and request their reconsideration based on the new regulatory guidelines," Chandrasekhar had said.

However, revenue secretary Sanjay Malhotra had said that the GST Council has taken a unanimous decision to impose a 28 per cent tax on online gaming, casino and horse racing based on the recommendation of the Group of Ministers (GoM).

The GoM had extensive consultations with all stakeholders from online gaming, casino, horse racing, etc. and arrived at this taxation.

"I really doubt (it) because this decision has been unanimous and the decision has been taken as I mentioned after due consultation and deliberation. So, I don't think there is any chance of a review as early as this," Malhotra had said.