India: GoM to propose 28% GST for online gaming

Online gaming companies currently pay 18 per cent on cash collected from each game.
Online gaming companies currently pay 18 per cent on cash collected from each game.

The Group of Ministers (GoM) report is expected to be submitted to the goods and services tax (GST) Council for consideration soon.

India.- The GoM has decided to propose a goods and services tax (GST) of 28 per cent for online gaming, replacing the current 18 per cent. There had been doubts about the distinction between games of skill and games of chance, but authorities have finally decided to tax both as demerit goods.

Demerit good refers to goods or services that are regarded as unhealthy, demeaning, or otherwise inappropriate because their consumption is perceived to have negative consequences for the consumer. For casinos, the GoM had previously recommended taxing the full face value of chips/coins purchased.

GST would no longer be levied on the stake value of each betting round, including bets won in previous betting rounds. Additionally, the GoM has proposed a 28 per cent GST on casino entry fees including food and beverages.

Some fear that an increase in taxes could encourage players to choose illegal gambling websites that do not deduct taxes and could harm the growing game industry. According to a report from the Confederation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young (EY), the number of players paying for online gaming in India grew 17 per cent from 80 million in 2020 to 95 million in 2021.

The number of online gaming players overall increased by 8 per cent from 360 million to 390 million. By 2023, the number is expected to exceed 450 million. According to the report, the annual revenue of the online gaming segment in India grew by 28 per cent, from Rs79bn in 2020 to Rs101bn in 2021.

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