28% GST on online gaming 'unconstitutional, irrational, egregious'

Online gaming industry stakeholders on Tuesday termed the 28 per cent GST on the full value of gaming as "unconstitutional, irrational and egregious", saying that the move is a self goal that will kill the skilled online gaming sector in the country.

The 50th GST Council has announced its decision to levy a 28 per cent GST on online gaming, along with horse racing and casinos which comes as a drawback to online gaming companies. The GST will be applicable to gross revenue/total prize pool.

Roland Landers, CEO of the All India Gaming Federation, said that the decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities.

“We believe this decision by the GST Council is unconstitutional, irrational, and egregious. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms,” Landers said in a statement.

Joy Bhattacharjya, Director-General, Federation of Indian Fantasy Sports (FIFS), said they are disappointed that the GST Council and authorities have chosen to apply 28 per cent GST on the total entry amount including prize money.

“A change in valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer, and loss of employment for lakhs of skilled engineers,” Bhattacharjya said.

The decision, say industry leaders, will shift users to illegal betting platforms leading to user risk and loss of revenue for the government.

However, Finance Minister Nirmala Sitharaman said the decisions related to 28% GST on online gaming and casinos was not aimed at targeting any particular industry.

“The decisions were intensive and were taken after consultation with all the members, including those representing states like Goa and Sikkim where casinos form a key part of the tourism sector,” she said during the GST Council meeting.

Aaditya Shah, COO, IndiaPlays, said that the 28 per cent tax rate will bring significant challenges to the gaming industry.

“This higher tax burden will impact companies' cash flows, limiting their ability to invest in innovation, research, and business expansion. There is a fine line between skill-based games and casinos/betting apps, and they must not be treated the same way,” Shah said in a statement.

A levy of an 18 per cent tax rate would have been helpful for the gaming industry, said industry experts.

According to Amrit Kiran Singh, chief strategy advisor to the Founders, Gameskraft, one must remember that over 2 lakh jobs have been created by the online gaming industry.

“This move is a self goal that causes a body blow to India's startup ecosystem,” he lamented.

The industry leaders requested the GST Council and the government to reconsider this decision.

“It is very unfortunate that when the government has been supporting the industry, in terms of online gaming rules, clarity on TDS, etc that such a legally untenable decision has been taken, ignoring the views of most GoM states who studied this matter in detail,” said Landers.