After the two-day GST council meeting held on July 23-24 at Bengaluru, the GST Council’s Group of Ministers (GoM) discussed the tax rates levied on the online gaming industry from 18 to 28 per cent.
The online skill-based games are being clubbed with casinos, horse racing, lottery, betting, and other chance-based games. This, along with the increase of tax rates being imposed on the whole contest entry amount (CEA), has caused upheaval in the online gaming industry.
As of now, the 18 per cent GST is levied on the platform’s commission taken from the pool of money invested by the players in small amounts on skill-based games, which is known as the Gross Gaming Revenue.
However, with the new tax policies being discussed, 28 per cent GST can be levied on the full Contest Entry Amount. The increase in tax slab may negatively affect the gaming platforms’ profit margins and the overall gaming ecosystem.
Moreover, clubbing of skill-based games with chance-based games for the new taxation policies blur the distinction between the two, which has been made and upheld by Indian courts for over 60 years. The two are different in terms of law as well as practice, and therefore can’t be treated at par with each other.
The GoM, led by Meghalaya CM Conrad Sangama, have made efforts to understand the functioning of the online gaming industry and have held meetings with the industry leaders to address the concerns raised by them to reconsider the tax rates.
As per industry sources, these issues have been raised by the All India Gaming Federation (AIGF) during their meeting with the GoM, whose representatives, according to sources, stated that such form of taxation will be catastrophic for the gaming industry and will nip out the slightest potential the industry has towards contributing to the Indian economy.
There has been no decision with regards to reconsideration of tax rates yet. However, the GoM will meet again in the first week of August and have been given time till August 10 to submit their final report, and the industry is awaiting the final decision with bated breath.
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