GST In Online Gaming – Explained explains how GST impacts this industry. This article explains how GST applies to platform fees and the total bet value, as well as how it will affect smaller companies. There are some important differences between the two categories of games – online skill-based games are not considered gambling. As such, the current GST rate of 18% is in line with international best practices and will help reduce the incidence of illegitimate operators.
cryptocurrencies attract 18% GST
The GoM is poised to plug the legal loopholes and clarify the taxing of online gambling and cryptocurrencies. While this could lead to a higher tax rate for online gaming, it would also expand the GST net to cover the entire gamut of online activities. Parliamentarians are demanding the inclusion of cryptocurrencies in the GST list. However, the GoM may not introduce a formal GST regime until it determines the cryptos’ classification rate.
GST on platform fee
Whether GST should be charged on the platform fee for online games with real money remains to be seen. The industry is split on whether online games of skill should be treated the same as games of chance, or whether they should be excluded from the GST regime entirely. As an industry, we are concerned about the impact of a change in tax legislation that will negatively impact our gaming sector and population. Nonetheless, we are hopeful that the government will clarify its GST methodology and amend the law to address concerns regarding online gaming.
GST on total bet value
The government is proposing to levy GST on the total bet value of online gaming, casinos, and racecourses. The proposal is opposed by the online gaming industry, which favours a flat 18% GST rate. The industry also opposes combining GST with gambling. But the government has to heed the wishes of the people. The GST Council may take up the issue again within the next few days.
Impact of GST on smaller companies
Indian online gaming companies are worried about the new tax regime. A group of ministers led by Meghalaya Prime Minister Conrad Sangma advises the GST Council on gaming issues. The group is expected to recommend a 28% GST level for gaming platforms. However, the GST Council has not yet issued any notification regarding this matter. Thus, it is difficult to tell if the new tax regime will have a major impact on online gaming companies.
Taxing games of skill
IndiaTech, a trade body representing consumer internet companies, is lobbying the government to treat games of skill differently from games of chance. It has proposed that online gaming platforms should only be subject to goods and services tax on the amount of prize money received by the platform, not on the prize pool itself. The proposed rules are also unlikely to affect the popularity of online gaming in India. However, the issue is still unclear. If these games are taxed as gambling, then Indian gamers may shift to foreign platforms. Alternatively, the Indian gaming industry may have to increase fees to stay in business.