The GST council is set to meet on August 2 to decide on the implementation of GST on online gaming. The council will decide whether the 28% GST will be levied on deposits or on every game. The revenue secretary acknowledged that levying a 28% tax on every game would lead to repeated taxation of the same rupee, resulting in an effective tax rate of up to 50%-70%.
Over 30 global and Indian investors have expressed concerns about the debilitating effect of taxing every game on the industry. Levying 28% GST on every game would result in a more than 1,000% increase in GST liability, leading to the closure of nearly all 1,000 Indian gaming startups, loss of employment for over 50,000 high-skilled jobs, and burdening 40 crore Indian gamers.
If the GST is levied on CEA instead of deposits, cumulative GST collections would reduce by over INR 40,000 Cr and overall tax collections by around INR 45,000 Cr over 5 years. Additionally, foreign investments worth $2.5 Billion and the Enterprise Value of Indian gaming startups worth $20 Billion will be written off.While deliberating on the issue, former Chairman of the Competition Commission of India, Mr. Dhanendra Kumar said “The government has grouped online gaming with casinos and horse racing for taxation; while this in itself may be understandable, the cascading effect resulting from taxation on full value may be the biggest damper.”
