127 cos write to PM, FM; seek reversal of 28% tax on online gaming

Amid the controversy over the Good & Services Tax (GST) Council's decision to impose a 28% tax on money put into online gaming platforms, a group of 127 industry players has requested the government to revisit this move, saying it could hurt the industry at large.

The companies on the list include names like MyTeam11 Fantasy Sports (MyTeam11), Nazara Technologies, Third Unicorn (CrickPe), Gameskraft Technologies, and associations like All India Gaming Federation, E-Gaming Federation, Federation of Indian Fantasy Sports, among others.

In a letter addressed to Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi, the online gaming players say the decision has caused "significant distress" in the industry, and that it'll reverse the growth the gaming industry in India has seen so far.

The companies say it could force many to indulge in illicit activities like offshore gambling, which will beat the sole purpose of the government's move, which is to garner higher tax collection.

The Indian gaming industry also fears lakhs of job losses after the GST Council's decision. "We believe this decision by the GST Council ignores over 60 years of settled legal jurisprudence by lumping online skill gaming with gambling activities," says Roland Landers, CEO of the All India Gaming Federation.

Landers adds the only winners in this decision will prove to be "illegal" and "anti-national" offshore-based gambling and betting platforms. Landers also hopes the government will reconsider this recommendation of the GST Council, saying it will be "catastrophic" for the $1 trillion digit economy dream of Prime Minister Narendra Modi.

Pratik Jain, partner, Price Waterhouse & Co LLP, says the decision to levy 28% on gross value in the case of online gaming and casinos was perhaps not what the industry was hoping for. While it has been indicated that this proposal is clarificatory in nature, it would have been better to make it prospective to put the past dispute to rest, said Jain.

The Goods and Services Tax Council, in its 50th meeting on July 12, decided to tax online gaming, horse racing, and casino services at a uniform rate of 28%.

The new tax rate will be applicable on the face value of the chips purchased in casinos, on the full value of the bets placed with bookmakers in the case of horse racing, and on the full value of the bets placed during online gaming, says the GST Council.

This comes after a Group of Ministers (GoM) was constituted to look into the issues related to taxation on casinos, horse racing, and online gaming. The GoM submitted its first report in June 2022 and it was placed before the GST Council in its 47th GST Council meeting wherein, it was decided that the GoM may relook into all the issues once again. The GoM submitted its report and it was placed before the 50th GST Council meeting.