GST collections from real-money gaming jump 412% to Rs 6,909 cr in 6 months under new tax rates, says FM Sitharaman

Real-money games, where the transfer of money is involved, currently forms the bulk of revenues of the country's overall gaming industry that clocked $3.1 billion revenue in FY23, a 19 percent growth from $2.6 billion in FY22

The Goods and Services Tax (GST) collections from India's real-money gaming industry increased by 412 percent to Rs 6,909 crore for the six-month period between October 2023 - March 2024, underscoring the significant tax windfall for the government since the new 28 percent tax regime took effect.

For the six-month period prior to the new tax rates, collections were Rs 1,349 crore, Finance Minister Nirmala Sitharaman said during a press briefing after the 54th GST council meeting on September 9.

Real-money games, where the transfer of money is involved, currently forms the bulk of revenues of India's overall gaming industry that clocked $3.1 billion revenue in FY23, a 19 percent growth from $2.6 billion in FY22. The sector is expected to touch an estimated $7.5 billion by FY28.

In April, Moneycontrol had reported that GST collections from the real-money gaming sector reached Rs 3,470 crore for the October-December 2023 quarter, a 5.7x increase from Rs 605 crore collected in the previous quarter. The latest figures indicate that GST collections were Rs 3,439 crore for the January-March quarter.

Read: How GST Council's 28% tax levy affects India's real-money gaming sector

In August 2023, the GST Council imposed the top GST slab of 28 percent on the full face value of player deposits, irrespective of whether it is a game of skill or chance. Although, it had agreed to review this decision six months after its implementation in October 2023.

In the press briefing, Sitharaman said the status report on online gaming and casinos has been submitted, without disclosing any specific details. According to CNBC-TV18, the Council has decided to maintain the status quo on the rates, following a review of the report.

Prior to the new tax rates, real-money gaming platforms paid 18 percent GST on the platform fees, also known as Gross Gaming Revenue (GGR). Platform fee is the commission levied by these operators from players for allowing them to participate in a game on their platform.

The new tax rates have led to a significant rise in the tax outflow of companies, increasing by as much as 350 to 400 percent, industry executives and other stakeholders had told Moneycontrol earlier. It had also resulted in a wave of layoffs across the sector, with many startups even shutting down in the past year.

That said, it's worth noting that these tax rates do not apply to free-to-play and paid video games in the country, since they don't involve a staking or a wagering element. They are taxed at 18 percent GST rate, which is already included in the app sales on Google Play Store and Apple App Store.

No discussion on retrospective tax notices

India's burgeoning real-money gaming sector currently stands at a critical juncture with its future growth resting on the implementation of a comprehensive regulatory framework in the country, and the outcome of court cases related to the constitutional validity of state-level bans on real-money gaming formats and the role state governments have in regulating the sector, among others.

To make matters worse for the industry, Indian authorities have also served retrospective tax notices to a slew of skill-based gaming firms such as Dream Sports, Gameskraft, Games 24x7, Delta Corp's Deltatech Gaming, and Head Digital Works (A23) for alleged tax evasion to the tune of over Rs 1 lakh crore in the past couple of years.

All online games involving bets played between August 2017 and October 1, 2023, irrespective of skill or chance, need to pay a GST rate of 28 percent on the full value of the bets placed, as it fell under the category of gambling, the council said.

A batch of around 30 petitions by real-money gaming companies challenging retrospective GST notices is currently pending before the Supreme Court which is set to hear the matter in the coming weeks.

During the press briefing, revenue secretary Sanjay Malhotra said there was no discussion on these notices during the GST Council meeting. "The matter is sub-judice. We await the decision of the court" he said.

In June 22, the Council had recommended an amendment to the Central Goods and Services Tax (CGST) Act, 2017, which would empower the government to discuss and overrule any retrospective demand sent by authorities.

Malhotra however clarified today that the newly introduced Section 11A of the GST Act 2017 will be used in “rarest of the rare cases” to offer retrospective GST relief.

“It’s not a usual section to be used. It has to be used in the rarest of rare cases. It’s not to be used generally. As a matter of fact, we would not like to issue a circular at this point. Nothing was discussed regarding it in the September 9 meeting” he said.