High GST slab an impediment to the nascent online gaming industry

The 47th GST Council meeting took place in Chandigarh for its first session on June 28 and the second session on June 29. The GoM (Group of Ministers) report was one of the important reports on the agenda for the discussion. The GST Council deferred the decision on imposing 28% goods and services tax (GST) on casinos, online gaming and lottery.

The Group of Ministers, formed under the orders of the GST Council, will submit the report on the issue after 15 days. The decision has been deferred because there are issues that need to be discussed. Hence, the GoM, led by Meghalaya Chief Minister Conrad Sangma, has been given another 15 days to work on the issues.

Roland Lander, CEO – The All India Gaming Federation, commented:

“At one level the sector is very upbeat at the prospect of contributing towards growth of the Indian economy. We are very enthused and grateful for the encouragement shown by the government, through formation of AVGC task force, constitution of inter-ministerial task force and the recent initiatives by MeITY to engage with the industry. But all this will amount to nothing, if it is not supported by a progressive taxation regime. 

“An increased tax rate, and then levying the tax on the entire contest entry amount (instead of GGR), will be catastrophic for the industry, even nipping its potential in the bud.“

Ankur Singh, CEO and Founder, Witzeal Technologies, stated:

“The online gaming sector is at a nascent stage and has a promising potential to evolve further and contribute hugely to the overall economy of our nation. Hon’ble Finance Minister Ms. Nirmala Sitharaman in her budget speech also recognized this potential and cited that the AVGC sector will provide numerous employment opportunities especially for young people and announced the Centre’s decision to establish an AVGC promotion task force.

“With such progressive steps being taken, the recent discussions on the GST proposal on the gaming industry feels like a step-back and drastic. Today, the online gaming industry encompasses above thousand start-ups with a promising outlook and hence it becomes crucial to have the tax slab at a reasonable rate that boosts the confidence of entrepreneurs and aspiring leaders of this ecosystem. The industry also has been gaining traction in the country and has been cumulatively contributing to the economy of our nation, attracting Foreign Direct Investment (FDI) and generating direct and indirect employment opportunities.

“We believe that a consultative approach with industry stakeholders would create a consensus-driven proposal that would enable the government to view it from the standpoint of reforming and boosting the gaming industry. The government’s decisions and support will determine the growth trajectory of the stakeholders and the nation as a whole. Having said that, we hope for a fair GST rate and government’s support in order to foster the long-term growth and sustainability of the industry and its ability to compete globally.“

The online gaming industry in India is a sunshine sector and is currently estimated at US$930 million with an annual CAGR of 22%, making the industry the second-largest online gaming market. As per the EY-FICCI report, online gaming will continue to grow and reach 500 million gamers by 2025 to become the fourth-largest segment of the Indian M&E sector.

The GoM had suggested that, in the case of online gaming, the activities should be taxed at a rate of 28% on the total value of the consideration, which includes the entry fee for a contest that the player has paid to participate in such games. Additionally, it suggested that the 28% GST rate be applied to all games of skill and chance without exception.