IAMAI urges govt not to raise GST on online skill-based gaming sector

The Internet and Mobile Association of India (IAMAI), a leading industry organisation, has sent letters to the Finance Ministry and the GST Council, demanding that only Gross Gaming Revenues (GGR) be considered for levying GST and that the rate for the online skill gaming sector not be raised. It has also stated that any increase in GST, which is now at 18%, will have a negative influence on the growth of the sunrise sector.

A case was made for keeping the service under the 18 percent GST slab rather than the 28 percent tax rate category, claiming that the move would severely harm the $2.2-billion sector. The increase in taxation would not only be disastrous for the sector, but would also encourage offshore operators to avoid Indian tax jurisdiction by hosting games in another nation, according to Games24x7 Co-CEO Trivikraman Thampy.

“It would be a triple headache for the industry, the government in terms of tax income, and the players in terms of being exposed to unethical operators,” he continued.

An association of online skill-based gaming platforms has petitioned the government to keep the Goods and Services Tax (GST) at the current rate for the business, which employs approximately 45,000 people and has 400 gamers.

E-sports, fantasy games, rummy, poker, and chess are examples of online skill games. These games are either free to play or require real money in the form of platform fees.

The issue has gathered traction as the GST Council prepares to vote on raising the rate on casino, racetrack, and internet gambling services to 28 percent, as proposed by a panel of state finance ministers. The agenda for the meeting, however, has yet to be finalised.

Following further deliberations at the officer level, a decision on whether the tax should be levied on gross or net valuation will be made. Casino, horse racing, and online gaming services currently attract 18% GST.

In May of last year, the government formed a panel of state ministers to improve the assessment of casino, online gaming site, and racing track services for the purpose of levying GST. The rise of the online gaming industry is directly related to the growth of various other industries, including semiconductors, banking, payment gateways, telecom, fintech, sports, and entertainment.

According to Thampy, GST is now levied on platform fees, also known as Gross Gaming Revenue (GGR), rather than the total cash pooled in for a game. “International best practises also highlight a taxation bracket of 15 to 20% for the online gaming industry. Our existing GST rate of 18 percent is consistent with best practises and decreases the prevalence of unauthorised operators ” He stated.

Online skill games are fundamentally distinct from games of chance, and the skill-based gaming sector does not comprise gambling or lottery, he stressed.