Recently, the Goods and Services Tax (GST) Council agreed to impose a 28% GST on the entire value of online gaming, casinos, and horse racing. This decision was met with strong opposition from the online gaming industry, which argued that such a heavy tax burden would cause significant losses for them. The online gaming industry requested the central government to reconsider the tax increase.
Minister of State for Electronics and Information Technology, Rajeev Chandrashekhar, announced on Monday that his ministry will request the GST Council to review the decision to impose a 28% tax on online gaming companies. He stated that the government is in the early stages of creating a strong framework for the online gaming sector. Over 125 companies associated with online gaming had expressed concerns to the government, stating that the 28% tax would cause significant damage to the sector and result in job losses.
The enterprise value of the online gaming industry is approximately $20 billion, with revenue of around $2.5 billion. The GST Council believes that there should be no distinction between games of skill and games of chance concerning taxation. During the previous meeting of the Group of Ministers (GoM), there was consensus on proposing taxes for these activities, except for online gaming, as Goa had proposed only an 18% tax on the platform fee. It has been clarified that increased taxes will not be applied retroactively to these companies.
Additionally, FICCI’s Gaming Committee, representing major online gaming firms, had requested CBIC not to increase taxes on online gaming. They argued that such heavy taxation would cause significant losses to the online gaming industry, as no business can sustain such a high tax burden. Foreign online gaming firms providing services in the country will also have to comply with regulations set by the Ministry of Electronics and may be required to register in the country.