Last Update: July 12, 2023, 6:29 pm IST
Finance Minister Nirmala Sitharaman said during a press conference that online gaming, horse racing and casinos will all be taxed at 28%. (Representational image: AFP)
The online gaming sector is not happy with the GST Council’s decision, raising concerns about the future of the industry.
The decision to levy 28 per cent GST on online gaming, horse racing and other activities has come as a blow to industry executives, who are clearly not sure how the sector is expected to flourish despite so many limitations.
The management of Kick Games Studios Pvt Ltd said, “The GST Council’s decision to levy 28% GST on online games without differentiating between games of skill and chance poses a serious threat to the growth and sustainability of the online gaming industry in India.” Limited
Other organizations in the sector like Games 24×7 have also shared their concerns about the future of the business and the wrong direction the gaming sector is headed. “We are deeply distressed by the GST Council’s decision to levy 28% GST on Contest Entry Amount (CEA) as opposed to Gross Gaming Revenue, which is the international standard for the sector,” said Bhavin Pandya, co-founder and co-founder. CEO, Games24x7.
Apart from the fear of losing revenue and certain loss of employment because of that, it is also clear to these companies that such policies are beneficial only to those who are not included in the system.
“Imposition of GST on CEA will make the legitimate online gaming industry unviable, effectively driving consumers to offshore and illegal platforms that pay no taxes, resulting in loss of taxes and outflow of foreign exchange. Besides, it will also lead to loss of employment for thousands of people working in this sector,” says Pandya.
With over 77 per cent of India’s gaming sector revenue coming from the online segment, it is clear that the government wants these companies to pay their share, but high GST is not only detrimental to operations, but also discourages consumers from such activities. Also prevents you from joining.
“This burden will not only hinder the growth of this emerging industry, but also stifle new innovation and opportunities in its application. The decision does not take into account industry pleas, global precedents, and even counters the favorable regulatory environment being created for online gaming in recent months,” said Siddharth Sharma, SVP- Business Strategy, said Head Digital Works (A23).
Clearly, the new GST imposed on the sector is not proving to be a popular call, and most of these officials want a quick resolution to the situation with all stakeholders. “We urge the government to reconsider this decision and work with industry stakeholders to find a more appropriate taxation model that supports sustainable growth for the industry,” Pandya explained.
