AIGF appeals to FinMin against repeated taxation in online skill gaming

AIGF pointed out that while certain companies across formats that offer large tournaments may scrape through, even their revenues will be substantially affected

The All-India Gaming Federation (AIGF) on Thursday wrote to the finance ministry seeking a distinction in tax treatment between online skill games, and betting and gambling.

The letter cited fundamental differences in business models and revenue generation methods.

It also pointed out that the proposal to charge goods and services tax (GST) on the entire face value or deposit, instead of the platform fee will reverse the growth trajectory of the industry, lead to massive job losses, and could cause a rapid erosion of foreign direct investment (FDI).

“We have always been game agnostic and have advocated for all games of skill. We believe that a valuation on deposits will only favour the very large players and lead to the closure of a majority of MSME startups,” All India Gaming Federation's CEO Roland Landers said.

He pointed out that while certain companies across formats that offer large tournaments may scrape through, even their revenues will be substantially affected, while the platforms offering continuous games or casual games will be wiped out.

Therefore, he said, that the federation hopes that the GST Council will allow net deposits as the method of valuation, for all formats of skill gaming.

The letter also highlighted that if the “full value of bets” is understood to levy GST on every contest played every time, with fully taxed winnings, the GST burden will increase by 1,100 to 1,500 per cent and on account of taxation of redeployed player winnings, the same money will get taxed repeatedly resulting in a scenario where over 50-70 per cent of every rupee will go towards GST, thereby making the online real money skill gaming business model unviable.

Likewise, the letter mentioned that if the “full value of bets” for levy of GST on online gaming is the full deposit value via payment gateway, there will be a 350-450 per cent increase in GST burden. "This will result in the closure of most of the industry, including Micro, Small and Medium Enterprises (MSME)s, gaming startups, and even established significant players."

The signatory gaming companies, having a combined user base of over 400 million users, appealed that GST on deposits would result in the closure of all continuous game formats with weak price elasticity, as up to 75 per cent of the deposit money is in fact withdrawn back by users, on an average, as winnings.

Instead, the letter argued, if 28 per cent GST is to be levied on the Gross Gaming Revenue (GGR)/Platform fees, there would be a 55-65 per cent increase in GST quantum. This the letter said would ensure the survival of Indian online gaming operators.