Recently, the GST Council has decided to impose 28 percent GST on online gaming. This decision of the GST Council has been questioned by many online gaming companies.
1: Most of the stakeholders are concerned with the recommendations of the GST Council due to its harmful effects on the gaming industry. What do you think about this?
Due to the double whammy, the change in GST rules has turned out to be a bitter medicine. Due to this, the tax payout for the companies and the cost of playing the game for the users are going to increase. Many new companies may struggle to work in this new system, while larger companies may find it a bit easier to accept.
Unfortunately, the regulator never pleases everyone, but is always a rough tool.
The increase in GST rate from 18% to 28% is fully deserved in my opinion. Lastly, I believe many industries, including entertainment, pay GST at 28% on what online gaming companies provide. There is no problem in implementing the 28% flat tax of GST – companies will pay it. It is the change in value that results from platform fees or commissions in the full value of each game and seems ineligible.
Applying GST on every game means that the online gaming industry has to be taxed more than the casino. The implication of taxing every play/win effectively increases the cost/taxes. This can effectively increase up to 50-70%. This will not be a viable option for the industry or the gamers and is an issue that must be addressed.
2: One of the possible consequences of the increased taxes may be an increase in the number of unlicensed operators due to non-payment of tax liability. Are licensed operators justified in fearing this?
This is something that is already happening. Earlier Law Commission reports and various media reports also indicate that the gray market for online gambling and betting is rampant causing loss of government tax revenue and putting gamers at risk Is. With the government imposing 28% GST on the face value, the number of gamers (gamers) going to unlicensed platforms will increase.
Excessive taxation may push gaming operators towards tax havens and the government will not get a lot of revenue. We certainly don’t want to push gaming companies offshore and lose revenue.
3: Council increased taxes on online gaming on moral and ethical grounds. What are your thoughts on this? You think it is addictive and bad for the youth?
To be addicted or not to be addicted is a debatable issue. Anyone can become addicted to exercise, including exercise. Prohibitive taxes or general prohibitions don’t work. If you make online gaming prohibitively expensive, you are encouraging illegal platforms to flourish. Sunlight is the best disinfectant – regulation always helps both industry and consumers and also revenue for the government earns.
4: What do you think about the online gaming industry as a whole? Many people claim that the government’s decision will lead to loss of jobs in the industry and investment in the industry will also be affected. What do you think about this?
In the last few years, the field of online gaming has grown rapidly in India. India is home to over 900 gaming companies and more are committed to the proof and there are 400 million active online gamers. In addition, the industry has already received $2.5 $2.5 billion in investment and has a huge potential for employment and exports. In 2022, it is estimated that around 100,000 people have got employment.
This industry definitely has immense potential and is a growing industry which should be productively exploited. There will be more predictable opportunities than risks. The industry should be regulated in the interest of the industry and the player, but it should be done by the player in the industry, I believe. In a competitive industry – one that operates according to the market – the industry knows best about the key concerns that need to be addressed.
As far as regulation is concerned, only one who bears it knows where it hurts the most. This self-regulatory approach works best for ever-evolving and improving fields like online gaming.