Online Gaming Industry Raises Concerns Over Impending 28% GST, Revenue Secretary Downplays Worries
New Delhi, 13th July 2023: Revenue Secretary Sanjay Malhotra stated that if the growth rates in the online gaming sector remain consistent, the implementation of a 28 per cent goods and services tax (GST) on online gaming could result in a twelvefold increase in revenue collection, reaching Rs 20,000 crore in FY24. Despite the gaming industry’s outcry over the levy being considered detrimental, Malhotra downplayed these concerns in an interview with Moneycontrol. He emphasized that the behaviour of online gaming volumes will only become apparent once the higher tax rate takes effect.
On July 11, the GST Council decided to impose a 28 per cent tax on online gaming based on the full face value of the game or the payment made to the gaming platform or website. However, the effective date for this levy will be disclosed after amendments to the GST law, as stated by Finance Minister Nirmala Sitharam after the council meeting.
Malhotra defended this decision by emphasizing the importance of equity in tax administration. If online gaming is considered akin to betting or gambling, and if betting, gambling, and lotteries are subject to a 28 per cent tax, then online gaming should also be taxed accordingly.
Additionally, Malhotra pointed out that even if online gaming is classified as entertainment, several entertainment-related activities such as attending sporting events, casinos, or horse racing clubs are taxed at a rate of 28 per cent.
At present, online gaming platforms are subject to an 18 per cent GST on platform fees, known as Gross Gaming Revenue (GGR), rather than on the complete value of the transaction, known as Contest Entry Amount (CEA).
