Internet and Mobile Association of India (IAMAI) has urged the central government and GST Council to not increase the goods and services tax (GST) on online gaming. Currently, the online gaming industry pays a GST of 18% on gross gaming revenue (GGR) and 0% on the contest entry fee (CEF). The GST Council is reportedly planning to increase the GST on GRR to 28%, which is the highest slab.
In an open letter, IAMAI asked for a status quo on GST on online games. The industry body pointed out that 28% GST is applied to products that are deemed “sinful consumption.” On the other hand, online gaming has been recognised as a game of skill and a legitimate trade by the Supreme Court of India.
IAMAI reiterated that equating skill games with gambling and betting by increasing the GST to the highest slab is against the letter and spirit of the Supreme Court judgment.
The industry body further warned that putting online gaming in the highest slab will increase the incidence of taxation to about 55%, which is unfair to the gaming industry. It would increase the cost of participating in games for the majority of end-users, which will eventually impact the GST collection from the sector.
According to IAMAI, online gaming companies have paid a cumulative GST of ₹6,000 crore in the last four years and are expected to pay ₹16,000 crore between 2022-25. This has been possible because online gaming platforms have a transparent and measurable online payment mechanism, the body added.
Some believe that the government is planning to apply a 28% GST on CEF. The IAMAI warned that this will lead to an 1,100% increase in tax and will break the industry. The body also reminded that globally, in most jurisdictions including the US, UK, and EU, tax is charged on GGR.
The body also warned that an increase in GST will push many of the offline service providers to go underground and lead to more revenue leakage.
The GST Council discussed the GST slab on online gaming in a meeting on June 29 and decided to defer the decision for the time being.