28% GST on real-money gaming: AIGF urges govt to defer rollout

AIGF claims to have over 120 members including skill-gaming companies and game developers across all formats and genres.

All India Gaming Federation (AIGF), an industry body that represents the country's top skill gaming firms, has approached the finance ministry seeking a suspension of its recent notification on 28 percent goods and services tax (GST) being implemented on online money games from October 1, Moneycontrol has learnt.

On September 29, the finance ministry had notified the effective date for the implementation of new GST rates as October 1, as per its initial plan. This was despite a dozen state governments yet to pass the requisite amendments to their respective state GST laws.

In a letter to revenue secretary Sanjay Malhotra dated September 30, AIGF CEO Roland Landers said these notifications are a "severe blow to the creed of 'one nation, one tax'" and will tear apart "the fabric of GST".

It may also open the "floodgates of unilateral actions in future by various states in various other aspects of GST", he said. Moneycontrol has viewed a copy of the letter.

AIGF claims to have over 120 members including skill-gaming companies and game developers across all formats and genres. Among its prominent members include Mobile Premier League (MPL), Gameskraft, Nazara Technologies, Deltatech Gaming, Head Digital Works (A23) and WinZO.

The industry body has requested that the implementation of the new tax regime be deferred until all the states pass their respective amendments, in line with the GST scheme, and until the judgement of the Supreme Court comes out.

The apex court is set to hear the tax department's alleged Rs 21,000 crore GST evasion case against skill gaming firm Gameskraft for a final hearing in the coming weeks.

On September 6, the Supreme Court stayed the Karnataka High Court's judgment that had quashed the GST department's show-cause notice. This move resulted in a flurry of retrospective tax notices being received by other skill gaming companies in subsequent weeks.

Dream Sports, the parent company of fantasy sports major Dream11, has filed a writ petition in the Bombay High Court challenging a show cause notice issued by tax authorities, Moneycontrol reported on September 26.

Skill gaming executives and legal experts have previously told Moneycontrol that any unfavourable ruling from the apex court could be the final nail in the coffin for the skill-based gaming industry that is already reeling under the 28 percent GST regime.

"Changing interpretation of taxation, retrospective tax notices, and changing policies have made most businesses unviable and the otherwise difficult journey of entrepreneurship, almost impossible to endure for startups in online gaming" said Saumya Singh Rathore, co-founder at WinZO.

Read: Death knell, fight for survival: Retrospective tax haunts India’s real-money gaming sector

Tax conundrum

An AIGF spokesperson said real-money gaming companies face a tax conundrum under the current GST implementation.

In states that have not amended their GST laws, companies must levy the central GST (CGST) but not the state GST (SGST) while in states that have amended their GST laws, companies must levy both CGST and SGST.

"The companies will have to grapple with the uncertainty brought by this scenario while already dealing with the massive changes they have to make in their operations. In this light, the industry is hoping that the government will take cognizance of the situation and allow reasonable time to the industry for transition" the spokesperson said.

In the letter, AIGF said such a scenario will lead to different amounts of taxes being collected and deposited across the country and a "complete breakdown of the very structure of GST". It is also not clear how technical systems will be modified to tackle this "anomalous scenario", the industry body said.

The letter also raised concerns about the rushed implementation of the amendments, which has rendered many provisions unusable and could potentially lead to real-money gaming companies facing additional operational and legal challenges.

Real-money gaming segment accounted for 77 percent of India's gaming sector revenues in 2022, which stood at Rs 13,500 crore, according to a recent FICCI-EY report. It is set to grow to Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025, the report added.

Read: Explained: GST Council’s 28% tax on India’s real-money gaming sector

In July 2023, the GST Council decided to impose the top GST slab of 28 percent on the full face value irrespective of whether it is a game of skill or chance.

On August 2, it provided partial relief by recommending that GST be levied on deposits instead of every bet placed, in order to avoid repeat taxation. Real-money gaming platforms currently pay an 18 percent GST on platform fees.

The council, headed by Finance Minister Nirmala Sitharaman, said it would review this decision six months after implementation. The next GST Council meeting is scheduled to take place on October 7.