The Goods and Service Tax Council started its 47th meeting on June 28. During the five years of the GST regime, the council changed and shuffled tax slabs on various goods. Now, one of the categories of goods and services that may see a rejig is online gaming.
The Group of Ministers (GoM) formed under the orders of the GST Council last year to analyse taxation in casinos, race courses and online gaming portals has advised that online gaming be taxed at the 28 percent slab “on the full value of the consideration, including contest entry fee paid by the player for participation in such games without making a distinction between games of skill or chance.”
This would put online gaming in the highest tax slab of GST along with other goods like aerated drinks and luxury cars.
Increase in taxes will kill the gaming industry, warn experts
The existing tax slab for online gaming stands at 18 percent and the amount taxed is not on the full consideration of transactions. Several industry leaders and groups have raised concerns about the harm the move may do to the sunrise sector that gaming is quickly becoming in India. With an estimated value of $1.5 billion, the gaming industry in India is expected to be worth $5 billion in the coming years.
"Such a step is not only in dissonance with international best practices but is also violative of the principles of GST," Sameer Barde, CEO of E-Gaming Federation (EGF), told IANS.
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Additionally, the new regime would be imposed on 30 percent of the entry fee along with a 115 percent surcharge. The current practice is to charge a tax of 18 percent on the platform fee/Gross Gaming Revenue (GGR).
As a result, the GST council is looking to not tax just the revenue that the platforms are collecting but the entire value of transactions that are being deposited with them by the players. This in turn will cause the tax burden to increase multifold.
"Applying GST on GGV (gross gaming value) will lead to an almost 900 percent increase in taxes, which will kill the emerging gaming industry,” Amrit Kiran Singh, adviser to the All India Gaming Federation (AIGF), told Mint.
US and EU
In the US, a flat tax is deducted on earnings from e-sports and online gaming but the exact rate depends on which state you are in. Online gaming is usually taxed at 10 percent in most states. But 30 percent tax is imposed on any winnings through online gaming and e-sports winning.
In the UK a variable tax slab is applied, starting at 15 percent for the first $3.5 million earned on the GGR, and going up to 50 percent for amounts over $17.8 million earned. While winnings on gambling are tax-free in the country, tax rates for e-sports are set at 40-45 percent.
The situation in the EU is slightly more complicated, but the tax rate revenue is set at 15-20 percent while taxation on winning is anywhere between 15-50 percent depending on the amount and the member state.
(Edited by : Sudarsanan Mani)
