The online gaming industry attracts 28% GST on gross gaming revenue, not on the entry amount
There are commentaries stating that the upcoming GST Council may view imposing a 28% Goods and Services Tax (GST) on the net amount in place of 18% on gross gaming revenue.
The government is going to raise the GST from 18% to 28% on the online skill-based gaming industries but it should be levied only on gross gaming revenue (GGR - is the fee levied by an online skill gaming platform as service charges to ease the participation of players in a game on their platform) and not on contest entry amount as could hit the USD 2.2-billion sector, say industry experts.
Games24x7's co-chief executive officer Trivikraman stated “As an industry, we are united on our ask that GST continues to be levied on the gross gaming revenue and not on the contest entry amount. The increase from 18 percent to 28 percent GST on the gross gaming revenue already increases tax revenue for the exchequer by around 55 percent,"
Adding further in his words - levying the tax on the contest entry amount (CEA) will only make the industry completely impracticable, however, the raised tax load will have to be passed on to the consumers, and it will be a ripple effect in terms of legitimate businesses who would lose their customer base of players moving to other market and offshore gaming platforms who have no tax liabilities in India. This is a two-faced situation of loss for the government, consumers & legitimate gaming platforms. Moreover, this is going to affect future investments.
Sumanta Dey, Senior Director, Public Policy and Corporate Affairs said “Applying GST on entry fees would only stop players to participate more in games, especially those who already pay heavy taxes & fees. In contrast, taxing gross gaming revenue, which is the global norm, would ensure that all players, regardless of their level of skill or success, are contributing to taxes in a fair way,"
The raised GST can influence players to move from legal to illegal platforms & offshore gaming platforms that do contribute neither to economic growth nor conform to the laws and regulations.
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