According to a joint report by ASSOCHAM & EY, titled ‘GST on Online Skill-Based Gaming’, the GST Council’s Group of Ministers (GoMs) is examining the GST on online gaming. One of the considerations by GoM is recommending a levy of 28% Goods and Services Tax (GST) on the complete contest entry amount including the prize pool, which can have an adverse effect on the industry. A Levy of GST on the contest entry amount would increase the tax burden on the nascent industry by 10 to 20 times. The industry currently pays GST at the rate of 18% on the platform fee or the Gross Gaming Revenue (GGR) earned directly by the gaming operators.
The report estimates that the industry contributes more than Rs 2,200 crores of GST in 2022 and the winnings from online games are subject to Income Tax, which also contributes a significant amount to the exchequer.
It has also listed the unique features that set online skill-based gaming apart from games of chance. It entails technology solutions that are provided by operators to enable user interface as well as build a gaming ecosystem and act as facilitators. The fee charged is a fixed consideration and is not dependent on the outcome. Its success is also dependent on the superior knowledge of the user and engagement with the game, making skill the predominant element.
The proposed levy of tax at 28% from 18%, along with 30% income tax on winnings, takes the rate of taxation on online gaming between 45-50%. With the GST tax proposal leading to higher taxation, it could lead to a decline in active users and discourage domestic gaming industries, noted the joint paper.
According to recent industry estimates, there are 500 gaming companies in the country, which have provided employment to thousands of people and have also seen an inflow of Foreign Direct Investment (FDI) worth US$2.7 billion. However, they are likely to be impacted by high taxation and would open doors for offshore operators. The report states: “This sector could also help in facilitating India’s opportunity in Animation, Visual Effects, Gaming and Comic (AVGC) sector and encourage the domestic players rather than driving users to foreign companies/ offshore platforms; thereby enhancing government’s revenue collection.”
Mr. Deepak Sood, Secretary General ASSOCHAM said, “The growth of the online gaming industry comes as no surprise as it’s largely youth-driven and has been fuelled by the increasing usage of the internet and smartphones, especially during the pandemic. India is expected to become one of the world’s leading markets in the gaming industry, which also bodes well in terms of a robust Digital Economy GDP as well as an employment generator. Therefore, any step that the government takes to strengthen the sector through an optimal tax structure is welcome.”
Online Gaming and Casinos – Licenses and Taxes
Governments around the world have recognized the revenue potential of online gaming and online casinos and have implemented various taxes to capture a portion of this revenue. The exact tax laws and rates vary from country to country, but the underlying principle remains the same. Governments want to tax the profits made by online gaming and online casino operators. Online gaming and online casinos are heavily regulated industries that are subject to a variety of licenses, taxes, and regulations. But some websites like bastaspelbolagutanlicens.com provide everything about foreign casinos without a Swedish license and spelpaus.
In many countries, online gaming and online casino operators are subject to the same taxes as traditional brick-and-mortar casinos. This can include taxes on gross gaming revenue, corporate income taxes, and taxes on player winnings. For example, in the United Kingdom, online gambling operators are subject to a 15% tax on their gross gaming revenue. This means that if an operator makes £100 million in revenue, they will have to pay £15 million in taxes.
