Government to impose 28% GST on online games

The 50th Goods and Services Tax (GST) Council meeting on Tuesday decided that a 28% GST will be levied on the full face value of online gaming. The move deals a severe blow to the gaming companies that offer real-money games.

The tax regime is likely to come into effect once the finance ministry brings the amendment to the GST law. 

“Online gaming, horse racing and casinos will be taxed at 28% (all three activities) and they will be taxed on full face value,” Union Finance Minister Sitharaman said in a media address following the meeting.

As mentioned above, the move is likely to have a wide impact on the gaming industry, estimated to be worth $5 billion by 2025, along with the number of gamers to hit 450 million by 2023.

The Federation of Indian Fantasy Sports (FIFS), a self-governing body that has members like Dream11, Fantasy Akhada, and Guru11, has expressed disappointment over the decision. It also said that the move will cause “irreversible damage” to the gaming industry.

The body cautioned the move could lead to a loss of revenue to the exchequer, and impact employment of several engineers. It further said the decision may prompt several users to illegal platforms.

“Needless to add, this decision will have a chilling effect on the USD 2.5 billion of FDI already invested by investors and jeopardise potentially any further FDI in the sector. Further, this decision will shift users to illegal betting platforms leading to user risk and loss of revenue for the government…,” Joy Bhattacharjya, Director-General, FIFS said in a statement.

"Imposing GST on Contest Entry Amount (CEA) will render the legitimate online gaming industry unviable, effectively driving consumers towards offshore and illegal platforms that pay no taxes, resulting in loss of taxes and outflow of foreign exchange. Further, this will also lead to loss of employment for thousands working in this sector," said Bhavin Pandya, co-founder, Games24x7.