The online gaming industry, which has experienced rapid growth in recent years, has encountered a significant setback.
In a recent decision, the GST Council has agreed to impose a 28% Goods and Services Tax (GST) on the total value of online gaming, horse racing, and casinos.
The council believes that there should be no differentiation between games based on skill and games based on chance.
During the Group of Ministers (GoM) meeting, there was partial agreement regarding the proposed tax on these activities.
However, online gaming became a point of contention as Goa suggested a lower tax rate of 18% on the platform fees for online gaming.
In the 50th meeting of the GST Council, it was announced that the tax on restaurants located in cineplexes would be reduced from 18% to 5%.
The gaming committee of FICCI, representing major online gaming companies, has appealed to the Central Board of Indirect Taxes and Customs (CBIC) to avoid increasing taxes on online gaming.
They argue that such high taxes will have a severe impact on the industry, making it challenging for businesses to operate.
Finance Minister Nirmala Sitharaman, who presided over the GST Council, stated that the Integrated Goods and Services Tax (IGST) has been eliminated for cancer medicine and food used for specific disease treatments.
She expressed satisfaction with the decision, noting that certain changes will be made in the GST law,
ultimately subjecting the full value of online gaming, horse racing, and casinos to a 28% tax.
The E-Gaming Federation has labeled the decision to impose a 28% tax on online gaming as unfortunate.
They assert that this tax will deal a significant blow to the industry, leading to an increase in illegal operators and making it difficult for online gaming firms to sustain their businesses.
The definition of online gaming and its associated tax have been previously discussed in GST Council meetings, but a consensus was not reached.
The industry is experiencing rapid growth, but the tax increase may pose challenges for its continued success.
