BhartPe founder Ashneer Grover unleashed a blistering attack on the GST council’s decision recommending a 28% tax, the highest slab, on online gaming. With no reservations held back, he questioned the suddenness of the judgment and vehemently criticised India’s regulatory risks, going as far as predicting an exodus of tech companies to more favourable destinations like Dubai or Singapore.
Ashneer, in response to a Twitter user highlighting policy inconsistency, echoed the sentiment and questioned, “Why judgement on online gaming now? Everyone from Virat Kohli to MS Dhoni to Sourav Ganguly has endorsed online gaming. Why was India public/Govt/BCCI not outraged by all cricketers endorsing? Why was BCCI allowed to take Dream 11 as the title sponsor? Sab Doglapan hai – Tech founders are dispensable – that’s the only truth.”
The Shark Tank India fame added that investing efforts or raising external capital in India’s uncertain regulatory environment for operators is impractical. “In future, all Tech companies will be based in Dubai/Singapore. As an operator Indian regulatory risk makes no sense to put one’s own effort – forget raising external capital for it!”
GST on online gaming in India
The Goods and Services Tax Council recommended collecting 28% GST at full value on online gaming, horse racing and casinos, Union Finance Minister Nirmala Sitharaman announced following the council’s 50th meeting in New Delhi on Tuesday.
Additionally, the GST Council has proposed to make amendments to include online gaming and horse racing as taxable actionable claims under Schedule III of the CGST Act. This levy would apply regardless of whether the game is considered a skill-based or chance-based game.
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What does the industry have to say about the 28% GST levy?
“The new tax rate will have far-reaching consequences for the industry and question its basic viability. Not only will this burden hinder the growth of this nascent industry, but its application will also compress new innovations and opportunities,” said Siddharth Sharma, SVP- Business Strategy, Head Digital Works (A23)
He added that it counters the favourable regulatory environment being built up for online gaming in recent months.
“Businesses have a legitimate concern that this move will push users towards illegitimate betting and gambling operators that don’t follow the laws of the land,” Sharma said.
According to Kartik Solanki, Partner-Indirect Tax, BDO India, the new taxation recommendation would lead to a significant increase in tax incidence for the online gaming industry as compared to the position currently adopted by them, where they were paying tax only on platform fees.
Solanki added that the taxation will lead to further uncertainty about the liability for the past periods, which is already a subject matter of dispute.
“The Hon’ble Karnataka High Court in the case of Gameskraft Technologies Pvt. Ltd. had held that online games such as rummy is a game of skill and not covered under the purview of ‘betting and gambling’ and hence, the same would not be leviable to GST.”
Do not want to end any industry: Sitharaman
In the post-GST council meeting media briefing, Sitharaman was asked if governments want to demotivate e-gaming given its adverse impact on children. The finance minister said that the council do not want to end any industry. The FM said that there was discussion on the moral question of whether these should be taxed at the same rate as essential items. But the council decided to “not give the wrong message in the country by lowering the tax rate on such industries to the level of essential goods,” she said.
“We are not looking at a game if it is skill-based, chance-based or both, we are purely looking at the value it generates that can be taxed,” Sitharaman added.
“Very substantive discussions took place on online gaming. MeitY is likely to provide a list of an inclusion or exclusion list of games. Our position is clearly on taxation. We will still align it with MeitY’s rules,” the FM said.