Finance Minister Nirmala Sitharaman announced on Tuesday that the Goods and Services Tax (GST) Council has decided to levy a 28% tax on the turnover of online gaming, horse racing, and casinos based on their full face value. The decision was reached by a group of ministers (GoM), which includes representatives from all states and union territories.
Tax Imposed on Entire Value
The panel Did debate whether the tax should be imposed on the face value of bets, gross gaming revenue, or just platform fees. Sitharaman clarified that the tax will be levied on the entire value, without differentiation based on whether the games involve skill or are based on chance.
Concerns Raised by Online Gaming Industry
The announcement comes shortly after the Ministry of Electronics and Information Technology (MeitY) received three proposals to establish Self-Regulatory Organisations (SROs) for online gaming. These SROs aim to set regulations and distinguish between skill-based online games and gambling applications.
The Federation of Indian Fantasy Sports (FIFS), a self-governing body representing industry members such as Dream11, Fantasy Akhada, and Guru11, expressed disappointment and warned of potential “irreversible damage” to the gaming industry. They argued that the tax increase could result in revenue loss, impact employment, and drive users towards illegal platforms.
A recent survey conducted by the Esports Players Welfare Association (EPWA) indicated that 61 out of 100 online gamers may discontinue playing due to the expected tax rise. The proposed changes are viewed as placing additional strain on the gaming industry, potentially affecting foreign investments, career prospects, and related sectors.
Industry stakeholders, including the FIFS and Games24x7, highlighted concerns that the GST imposition on Contest Entry Amount (CEA) would render the legitimate online gaming industry financially unviable. They warned that consumers may shift towards offshore and illegal platforms, leading to tax losses, foreign exchange outflows, and job cuts.
The gaming industry is closely observing the implications of these decisions and raising concerns about the potential repercussions on the sector’s growth, revenue, and employment prospects.
