Balanced approach to retrospective taxation needed for online gaming: Pinki Anand

Globally online gaming tax is typically based on Gross Gaming Revenue.

Retrospective taxation on online gaming has stirred debates on its fairness and long-term impact as the Goods and Services Tax (GST) notices are of higher amounts than the companies can garner, Pinki Anand, senior advocate, Supreme Court of India said. She called for a more balanced approach to ensure investor confidence and business growth in India.

"Companies are being taxed in proportions they cannot possibly garner,” Anand stated, underscoring the importance of maintaining investor faith to ensure the sector’s prosperity. Drawing on international tax norms, she pointed out that globally, online gaming tax is typically based on Gross Gaming Revenue (GGR), a more balanced and realistic approach than India’s current system, which taxes the full face value.

She was speaking at the Skoch Summit on ‘New Dimension in Inclusive Growth,’ held on November 30.

Addressing the complex issue of retrospective taxation, particularly its application to the online gaming industry, Anand, a prominent legal voice, emphasised the need to find a middle ground between generating revenue and ensuring fair taxation practices that do not stifle business innovation or investor confidence.

“Retrospective taxation is permissible under law, but has it really paid off?” Pinki Anand questioned, acknowledging the growing concerns around the practice. While retrospective tax is allowed, she pointed out that the repercussions on businesses, especially in the online gaming sector, have been significant. “The 28 percent tax imposed on online gaming companies is disproportionate and raises doubts about whether businesses can continue to operate,” she said.
The 28 percent retrospective tax on online gaming companies, as opposed to the previously levied 18 percent GST, has been a contentious issue. The tax, which also does away with the distinction between games of skill and games of chance, has raised concerns about its impact on businesses and foreign investments.

A Double-Edged Sword
Anand also drew parallels to other high-profile cases, such as those involving Vodafone and Cairn Energy, where retrospective taxation was reversed by the Indian government after corporate restructuring led to disputes over tax claims. These examples, she noted, underline the challenges of imposing retrospective taxes that are not in alignment with business realities.

“Do we really need retrospective taxation at all? It’s better to plan in advance,” Anand suggested, advocating for a forward-looking approach to taxation that would allow businesses to operate with a sense of security and stability. The debate over retrospective taxation has become increasingly relevant as India strives to balance revenue generation with fostering an environment conducive to business growth.

Anand emphasised the importance of creating an ecosystem that promotes innovation, startups, and digitisation, all of which are essential for India's economic progress. She stressed that while revenue growth is crucial, it should not come at the cost of businesses being discouraged by excessive or disproportionate tax policies.

Calling for a rethinking of retrospective taxation, she reinforced the need for a tax regime that encourages the flourishing of emerging sectors like online gaming, while also ensuring fair and equitable revenue generation for the government.