New Delhi, 13th July 2023: The online gaming industry has raised concerns over the upcoming implementation of a 28% Goods and Services Tax (GST) on online gaming. However, Revenue Secretary Sanjay Malhotra has downplayed these concerns, stating that the tax rate will only reveal its impact on online gaming volumes once it takes effect.
The decision to impose a 28% tax on online gaming was made by the GST Council on July 11. The tax will be based on the full face value of the game or the payment made to the gaming platform or website. The effective date for the levy will be disclosed after amendments to the GST law, as announced by Finance Minister Nirmala Sitharam after the council meeting.
While the gaming industry has expressed its opposition to the tax, Malhotra defended the decision, highlighting the need for equity in tax administration. If online gaming is considered similar to betting or gambling, which are subject to a 28% tax, then online gaming should also be taxed accordingly.
Malhotra further emphasized that various entertainment-related activities, such as attending sporting events, visiting casinos, or participating in horse racing clubs, are already taxed at a rate of 28%. Therefore, if online gaming falls under the category of entertainment, it should also be subject to the same tax rate.
Currently, online gaming platforms are subject to an 18% GST on platform fees, known as Gross Gaming Revenue (GGR), rather than on the complete value of the transaction, referred to as Contest Entry Amount (CEA).
Revenue Secretary Sanjay Malhotra projected that if the growth rates in the online gaming sector continue, the 28% GST on online gaming could result in a significant increase in revenue collection. He estimated that the tax could bring in approximately Rs 20,000 crore in FY24, marking a twelvefold increase. However, the true impact of the higher tax rate will only become evident once it is implemented.
As the implementation of the 28% GST on online gaming approaches, the industry will closely monitor its implications, while engaging with relevant authorities to address their concerns and explore potential solutions.
