The Online Gaming Industry is Struggling as GST Council Imposes 28% Tax: Worries and Concerns Rise

Table of Contents

• Introduction – Online Gaming GST
• GST Council’s Perspective
• Industry’s Reaction
• Conclusion

Introduction – Online Gaming GST

In a significant move during its 50th meeting, the Goods and Services Tax (GST) Council announced the imposition of a 28% tax on online gaming, casinos, and horse racing for their full face value. The decision sparked mixed reactions within the gaming industry, with concerns being raised about its impact on players, professionals, and the overall gaming ecosystem in India.

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GST Council’s Perspective

Finance Minister Nirmala Sitharaman clarified that the council’s intention was not to end any industry, but rather to address the moral question posed by the online gaming sector. The decision had been pending for several years, and all states actively participated in reaching this resolution. The GST will be applicable on the full value of bets placed or the total amount of consideration paid, regardless of whether the games are skill-based or luck-based.

Industry’s Reaction

The gaming industry in India responded to the GST announcement with apprehension and disappointment. Many stakeholders expressed their concerns, highlighting potential negative consequences.

1. Discouragement for Players and Burden on Professionals
   
   Shivani Jha, Tech Policy Lawyer and Director of EPWA (E-Gamers and Players Welfare Association), expressed worry that the new tax would discourage players from participating, and professionals who rely on gaming for their livelihood would be burdened by increased taxation. The tax hike could result in players seeking offshore platforms to avoid the additional financial burden.
   
2. Impact on Esports and Non-RMG Titles
   
   Soham Thacker, the founder and CEO of esports tournament platform Gamerji, pointed out that the lack of distinction between real money gaming (RMG) and non-RMG titles could negatively affect user base, revenues, and investor sentiment across the board. For non-RMG companies like his, the increased GST rate might lead to higher subscription costs or relocation of businesses outside India.
   
3. Unjustified Tax Rate for Competitive Gaming
   
   Sagar Nair, co-founder, and CEO of gaming-focused social networking platform Qlan, expressed concern that the higher tax rate would significantly impact the online gaming industry, including the esports community. He argued that competitive gaming, which relies heavily on skill and effort, should not be taxed at the same level as gambling activities.
   
4. Unfair Treatment for Esports
   
   Rohit Agarwal, founder and director of gaming-focused marketing firm Alpha Zegus, voiced disappointment with the inclusion of esports under the same tax domain as horse racing and casinos. He argued that esports involves a significant element of skill, unlike luck-based gambling, and thus deserves separate treatment under the tax regulations.

Conclusion

The GST Council’s decision to impose a 28% tax on online gaming has triggered concerns within the Indian gaming industry. Stakeholders fear that the increased taxation might discourage players, burden professionals, and lead to a potential exodus of gaming businesses to offshore platforms. Additionally, the lack of distinction between skill-based and luck-based games raises questions about the fairness of the tax imposition on the esports community. As the industry grapples with the implications of this move, discussions about revisiting the tax structure to support and foster the growth of the gaming ecosystem in India continue.