CAIT writes to FM against shocking decision of imposing 28% GST on online gaming

The Confederation of All India Traders(CAIT) has writes to FM against shocking decision of imposing 28% GST on online gaming.

On behalf of the Confederation of All India Traders, the apex representative body of the trading community in India. Writes to draw your attention to the recent catastrophic announce1ncnt in relation to online gaming by the 50th GST Council pursuant to its meeting on 11 July 2023, under which GST will be levied at the rate of 28% on the full face value for online skill-gaining co1npanies.

We humbly submit that the decision undermines the financial model of online skill-gaming companies, and imposes a tax burden that is contrary to common sense and far excessive in nature. We respectfully also state that the imposition of GST on the full face value ostensibly to bring online skill-gaming at par with casinos negates over 60 years of settled jurisprudence of the Hon’ble Supreme Court of India, which distinguishes games of skill from games of chance.

Catastrophic impact on employment

It is our humble submission that the levy of GST on the full face value will make the online skill-gaining industry unviable to operate, as tax will now have to be submitted on deposits that are not in the nature of revenue. This will make the industry financially unviable, and will lead to massive job losses as companies will be forced to either close down or significantly reduce their workforce to accommodate the inordinate tax burden on them.

A consequential rise in offshore companies leading to revenue loss

We also submit that the heavy tax burden will push Indian users to approach offshore gaming companies that will offer more lucrative winnings. We submit that such offshore companies are not subject to Indian laws, and do not deposit any taxes, even while earning significant revenue from Indian users. We kindly draw your attention to one such offshore company that is already openly and actively advertising its non-compliance with Indian laws, such as GST and TDS.

GST Council’s decision an aberration on online gaming’s regulation

We truly believe that the GST Council’s decision is an aberration, and does not reflect the Hon’ble Government of India’s (GOI) efforts to promote and regulate online gaming. The Hon’ble GOI had earlier this year notified the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry for online skill-gaming. The MeitY had since then introduce rules for online gaming, including the setting up of self-regulatory bodies and game-wise certification.

In light of the above, we urge your Hon’ble self to take cognizance of this aberration, which is contrary to the Hon’ble GOI’s continuous positive efforts to promote responsible gaining in India. We implore you to reevaluate the GST Council’s decision, and revoke the grave lapse in its decision.

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