The recent announcement by Finance Minister Nirmala Sitharaman regarding the imposition of a 28% Goods and Services Tax (GST) on online games, horseracing, and casinos has raised concerns among industry experts. With over 400 million online gamers in India, the move has the potential to cause significant losses to the online gaming industry.
THE DECISION
The GST council made the decision during its 50th meeting, which included an amendment to the GST law to incorporate online gaming. The new tax rate of 28% will be applied to the full value of online gaming transactions.
IMPACT ON GAMERS
For online gamers who spend real money on games, the 28% GST means that they will have to pay Rs 28 for every Rs 100 spent on gaming, irrespective of whether the game is skill-based or based on chance. There is no differentiation in the GST rates for different types of games. Additionally, if gamers win more than Rs 10,000 in a game, they will be subject to a 30% Tax Deducted at Source (TDS). These new GST rates may lead gamers to limit their participation in online gaming activities due to increased costs.
GOVERNMENT’S PERSPECTIVE
When questioned about the potential impact on the online gaming industry, Finance Minister Sitharaman stated that the intention was not to kill the industry but to include it under the tax regime. States like Goa and Sikkim welcomed the decision as they contribute significant revenue. The government aims to balance the need for revenue generation with the preservation of various industries.
THE CONCERN AND CRITICISM
The implementation of a 28% GST on online games places an additional financial burden on gamers. It effectively increases the cost of participating in online gaming activities, which can discourage gamers, especially those with limited budgets, from engaging in these activities, some say.
The GST rate does not differentiate between skill-based and chance-based games. Treating all games the same under the GST implies that skill-based games, which require strategic thinking and expertise, are being unfairly penalized with the same tax rate as games based purely on chance, some critics argue.
Moreover, they opined that the high GST rate has the potential to negatively impact the online gaming industry. It may deter new players from entering the market and hinder the growth of existing businesses. This could lead to a decline in investments, innovation, and job opportunities in the sector.
Higher taxes may discourage individuals from participating in online gaming activities, which could have a broader negative impact on the gaming culture and community. It may limit opportunities for skill development, social interaction, and entertainment that gaming provides. Gamers might also find it challenging to seek alternatives to online gaming due to the lack of comparable platforms or affordable options. The high tax rate limits choices and potentially hampers the growth of the gaming industry as a whole.
