Will go back to GST Council to reconsider tax on online gaming: MoS IT

The online gaming industry would have heaved a sigh of relief after Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said that his ministry will approach the GST Council to relook at its decision of imposing 28 per cent tax on funds that online gaming companies collect from customers.

“We will go back to the GST Council and may be request their consideration on the facts of the new regulatory framework,” said Chandrasekhar. He was speaking at the CNN-News18 Town Hall event.

The Minister also said that the process of creating a regulatory framework for online gaming industry only started in January of 2023. “We are in the early stages of creating a predictable, sustainable and permissible online gaming framework,” he added.

He also pointed out that the GST council is not the Government of India but represented by all state governments. “It is a federal organization. State governments and finance ministers have come together and created a GST framework. That is a consequence of three years of their work. While we may quibble with the findings, we have to recognize the process of creating a framework, which has started in January 2023,” he said.

The GST Council on July 11 decided to impose 28 per cent tax on full face value of bets in online gaming, casinos and horse trading.

Since the announcement the industry has been making representation to the government to rethink the decision as it will hurt the industry significantly. Close to 130 companies, associations and industry bodies made a representation to the government.

In the appeal that was made to the government, the industry argued that online skill gaming, with a $20 billion enterprise valuation, $2.5 billion in revenue, and $1 billion in annual taxes, is set to grow by 30% CAGR to reach $5 billion in revenue by 2025. The total number of Indian online gamers grew from 360 million in 2020 to over 420 million in 2023. India’s gaming industry attracted FDI of about $500 million between 2014 and 2020, and over $1.5 billion between January 2021 - June 2022. The industry currently supports lakhs of direct and indirect jobs, and these numbers will grow substantially in the next few years.

“The proposal to charge GST on the full Deposit Value will reverse the growth trajectory of the industry. This would potentially have devastating implications (including shut down of businesses) for MSMEs and startups that may not have the capital reserves to withstand such a sharp tax increase. Further, this decision will encourage illegal offshore gambling operators, drive Indian users to them and ultimately lead to neither optimal tax collection nor the growth of the legitimate industry,” the industry wrote in a letter.