The Goods and Services Tax (GST) Council, led by Finance Minister Nirmala Sitharaman, is scheduled to meet today to discuss the 28% tax imposed on online gaming, horse racing, and casinos. The council’s decision to levy this tax has raised concerns among the online gaming industry and stakeholders, who are seeking clarity on the definition of online gaming and whether games of skill and chance will be treated differently.
The online gaming industry has expressed its reservations regarding the 28% taxation, arguing that there should be a clear distinction between games that involve skill and those based on betting, wagering, and gambling. Bimal Jain, Chairman of the Indirect Tax Committee, PHDCCI, has suggested that a more reasonable tax rate of 18% could have been considered to support the growth of this industry, including startups in the sector.
Roma Priya, founder of Burgeon Law, a legal firm focused on the startup ecosystem, has also raised concerns about the tax, stating that it erases the differentiation between games of skill and chance. She argues that treating online skill gaming as equivalent to gambling contradicts legal precedents and could negatively impact customers, leading to reduced playable value. Priya believes that such taxation measures could hinder the growth of the online gaming industry.
Suman Bannerjee, CIO of a US-based hedge fund Hedonova, echoes the concerns raised by industry stakeholders, suggesting that the 28% tax rate could have adverse effects on the online gaming sector.
Sanjay Chhabria, Director of Indirect Tax at Nexdigm, highlights the positive aspect of the council’s willingness to consider industry feedback. However, he believes that a complete rollback of the tax levy is unlikely. Chhabria emphasizes that this is an opportunity for industry players to appeal for a reduced GST rate, as well as a clear distinction between skill-based and chance-based games. He also suggests a shift in the valuation mechanism, favoring gross gaming revenue over the value of bets.
As the GST Council meets today, the industry awaits further clarification on the tax structure and its implications on the online gaming sector. Stakeholders hope that their concerns will be heard, and a more balanced approach will be taken, considering the growth potential of the online gaming industry and the need to differentiate between skill-based games and games of chance.
