The Indian government plans to impose a major 28% tax on the fund that online gaming firms collect from consumers. This is a massive blow to one of the fastest-growing industries in India. This move is already being labelled as catastrophic and unconstitutional by online gaming company leaders. The government is planning to facilitate this by bringing a legal amendment in this monsoon session. It is decided that a uniform 28 per cent tax will be applicable on full face value for online gaming, casinos, and horse racing.
Online gaming takes a hit
A group of ministers were designated to look into the matter of taxation surrounding online games. This group submitted its first report in June 2022 which was taken up by the GST council in June last year. After the submission of the report, multiple discussions and debates around the implications of taxes on online games were held. Reportedly, the discussions were centred around two major questions: whether the activities of race courses and online gaming directly translate to betting and gambling or not and secondly how should the supplies of casinos, race courses, and online gaming be valued?
What does the taxation on the online gaming industry imply?
The implications of the 28% GST on online gaming in India are monumental as it entirely changes the landscape of the industry. Firstly, taxation directly translates to increased business costs for online gaming companies. The high taxation rate could result in difficulty for smaller gaming companies to compete with larger rivals. Additionally, the government can use taxation as a way to increase regulation of the online gaming industry. This could lead to stricter rules and requirements for gaming companies. The higher tax rate could lead to consumers shifting to offshore gaming platforms which are not subject to GST.