Gaming industry urges Govt to reevaluate 28% repeat taxation

Online gaming companies seek review of 28% taxation

Online gaming companies have made a detailed representation to the Finance Ministry seeking a review of the GST Council's decision of levying a 28 percent tax. They also reiterated how the move will impact investor confidence, lead to loss of jobs, and hurt FDI in the sector, CNBC-TV18 reported.

During the meeting with the Revenue Secretary on July 15, online gaming companies also raised concerns about repeat taxation on online gaming platforms and players if GST is levied on the full value of bets. They said that taxing the full value of bets would lead to repeat taxation of the same rupee.

However, the Revenue Secretary said that the decision to levy a 28 percent tax on online games and casinos was unanimous, and asked them to present the calculations on tax on deposits vs tax on the full value of bets.

Also read: 28% GST on online gaming to yield Rs 20,000 cr annually: Revenue Secretary

The Goods and Services Tax (GST) Council announced earlier this month that bets placed in online gaming, horse racing, and casinos will attract a 28 percent tax at full value once the effective date for levying it is announced.

Finance Minister Nirmala Sitharaman has said that this decision is not aimed at hurting the industry but to make sure it is not taxed on par with essential commodities.

The increase in the goods and services tax on online gaming to 28 percent may drive players to the grey market to avoid paying higher taxes, companies and experts said.

The higher taxation will have more than a 10-fold impact on the tax currently paid by gamers, said Jay Sayta, a lawyer.

“Currently, if the player plays with a Rs 100 entry fee and the platform fee or commission of the online gaming website is 5 percent, then the GST that was being paid was 18 percent on the Rs 5, i.e. 90 paise. On the other hand, under the new proposal, the 28 percent tax on the Rs 100 entry fee (28 percent GST is on the face value) would be Rs 28, which is 31 times higher than the tax that was currently being borne by the consumer," he explained.