Online gaming industry debate higher GST rate

Hyderabad: The Group of Ministers (GoM) constituted by the GST Council to examine the taxation of the online gaming industry held a meeting on May 2 and reached a consensus on increasing the tax rate from 18 per cent to 28 per cent. And in the second meeting to be held on May 18, the […]

Hyderabad: The Group of Ministers (GoM) constituted by the GST Council to examine the taxation of the online gaming industry held a meeting on May 2 and reached a consensus on increasing the tax rate from 18 per cent to 28 per cent. And in the second meeting to be held on May 18, the GoM may examine the issue of valuation i.e whether to tax the gross gaming revenue (GGR) which is the current practice or the entire prize pool, which is an actionable claim as per the laws.

In this context, the debate on whether the GST has to be increased is gathering steam among the industry and they are making a strong plea against change in the regime to protect the industry from degrowth and shifting business to offshore. The industry has vehemently opposed the proposal of the Ministry of Finance to levy GST on 30 per cent of the entry fee 115 per cent surcharge instead of platform fee /Gross Gaming Revenue (GGR).

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In a press release, the industry representatives said that Telangana Finance Minister, Harish Rao, who is also part of the GoM, must take a holistic view considering their decision will impact Hyderabad’s status as a leading game development hub and startups will bear the brunt.

IndiaTech.Org CEO Rameesh Kailasam said, “It is necessary that games involving predominance of skill should ideally be taxed at 18 per cent on the platform fee. The GoM should ideally take a positive view and recommend continuance of the current practice of considering the platform fee / GGR as value of supply. Since online skill-based gaming is not gambling or betting or wagering, a clarification needs to be issued to resolve litigation and provide relief to the industry.”

Drawing parallels to the international online gaming industry tax structures, industry experts have pointed towards some leading international markets like the USA, UK, Australia and Germany, highlighting how they levy tax on GGR at a rate between 15-20 per cent. Supreme Court of India senior advocate Gopal Jain said, “We’ve seen internationally that markets which started taxing the prize pool instead of the GGR have had to revert back to taxing only to GGR as it resulted in non-compliance, revenue leakage and grey markets.”

It can be a win-win scenario for all stakeholders if uncertainty in policy-making and taxation for skill-based online gaming are resolved at the earliest. This in turn will help the Telangana government in the long term and make Hyderabad a dominant global force in AVGC software development, the release said.

 

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