The Goods and Services Tax Council, which recently met in New Delhi, has announced that online gaming companies will be subject to a 28% tax. This decision applies to online gaming, casinos, and horse racing, and the tax will be based on the full face value. The council made this decision during its 50th meeting, closing a loophole that had allowed fantasy sports companies to argue that their offerings were based on skill. The decision comes after previous discussions in which the Group of Ministers (GoM) broadly agreed on the proposed tax rates for these activities. However, there was no consensus on online gaming, as Goa suggested a lower tax rate of 18% for platform fees. The effective date of the 28% GST levy on online gaming will be determined after amendments to the GST law.
Finance Minister Nirmala Sitharaman stated that the GST Council would collaborate with the IT ministry to categorize games under the online gaming category. Regarding the 28% GST, she explained that the decision on taxation was made by considering the moral dilemma of giving priority to online gaming over essential goods, which have been subject to GST for some time. She clarified that the intention is not to eliminate online gaming, casinos, or horse racing, but that these activities have become so complex that there is no transparent solution.
This decision has been met with opposition from gaming companies, who have been against the 28% GST for online games. A group consisting of major online gaming companies, represented by the FICCI Gaming Committee, has urged the Central Board of Indirect Taxes & Customs (CBIC) not to increase the GST rate to 28% for the sector. They argue that such high taxation would be detrimental to the survival of the online gaming industry and would hinder its growth and innovation. They also express concerns that it may drive users towards illegitimate betting and gambling operators. Siddharth Sharma, SVP, Business Strategy, Head Digital Works (A23), stated that the new tax rate is unexpected, will have far-reaching consequences, and goes against favorable regulatory developments in the industry.