The decision has shocked the industry. Roland Landers, CEO of the All India Gaming Federation, said that the decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling. “This will wipe out the entire Indian gaming industry and lead to job losses. The only people benefiting from this will be anti-national, illegal, offshore platforms,” Landers said in a statement.
Joy Bhattacharjya, Director-General Federation of Indian Fantasy Sports (FIFS), said they are disappointed that the GST Council and authorities have chosen to apply 28% GST on the total entry amount, including prize money. “A change in valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer, and loss of employment for lakhs of skilled engineers,” Bhattacharjya said. The decision, say, industry leaders, will shift users to illegal betting platforms, leading to user risk and loss of revenue for the government.
Aaditya Shah, COO, IndiaPlays, said that the 28% tax rate will bring significant challenges to the gaming industry. “This higher tax burden will impact companies’ cash flows, limiting their ability to invest in innovation, research, and business expansion. There is a fine line between skill-based games and casinos/betting apps, and they must not be treated the same way,” Shah said in a statement.
The gaming industry had been expecting a lower tax of 18%. A levy of 18% tax rate would have been helpful for the gaming industry, said industry experts. According to Amrit Kiran Singh, Chief Strategy Adviser to the Founders, Gameskraft, one must remember that over two lakh jobs have been created by the online gaming industry. “This move is a self-goal that will land a body blow to India’s startup ecosystem,” he lamented.
The Internet and Mobile Association of India (IAMAI) also expressed concern over the decision to levy 28% GST on “the full face value of the consideration, instead of just the platform fee” and the impact this will have on India’s digital economy and online gaming industry. “The net effect of this levy will result in an approximate 1,000% increase in GST on the industry. It will cause irreversible damage to the $2.5 billion investments in the Indian online gaming startup ecosystem and lead to a complete halt on any prospective FDI (foreign direct investment),” the lobby group stated in a press statement.“Online gaming is distinct from gambling and betting,” the IAMAI stated. “Hence, taxing India’s legitimate online gaming industry with gambling activities will not only massively dent the burgeoning online gaming sector, but will also threaten to make the entire $20 billion Indian online gaming sector an unviable business model.”However, Finance Minister Nirmala Sitharaman said the decisions related to 28% GST on online gaming and casinos was not aimed at targeting any particular industry. “The decisions were intensive and were taken after consultation with all the members, including those representing states like Goa and Sikkim, where casinos form a key part of the tourism sector,” she said during the GST Council meeting. Meanwhile, GST authorities are set to initiate fresh tax demand notices against 40 online gaming companies. Sources said liabilities in the case of the 40 online gaming companies could add up to Rs.10,000 crore. The authorities were awaiting clarity from the GST Council on taxing online gaming companies. The Centre is also expected to move the Supreme Court against the Karnataka High Court verdict in the Rs.21,000 crore Gameskraft tax case.