India’s government said it would impose a 28 percent tax on funds that online gaming companies collect from their customers, in a setback to the $1.5 billion industry, which could lead to higher ticket prices.
Gaming apps are endorsed by sporting heroes in India, where cricket is a national passion, but concerns have mounted over possible addiction and financial losses.
International investors have also been drawn to the industry, with Tiger Global backing Indian gaming startup Dream11, the lead sponsor of India’s national cricket team.
India’s Finance Minister Nirmala Sitharaman, who chairs the goods and services tax (GST) council, comprising state finance ministers, said the decision to tax online gaming was reached after extensive discussion.
The 50th GST Council has announced its decision to levy a 28 percent GST on online gaming, along with horse racing and casinos. The GST will be applicable to gross revenue/total prize pool.
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 per cent 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,” Joy Bhattacharjya said.
The decision will shift users to illegal betting platforms leading to user risk and loss of revenue for the government, say industry leaders.
Finance Minister Nirmala Sitharaman said the decisions related to 28 percent 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.
Aaditya Shah, COO, IndiaPlays, said that the 28 percent 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.
A levy of an 18 percent tax rate would have been helpful for the gaming industry, said industry experts.
Amrit Kiran Singh, chief strategy advisor to the Founders, Gameskraft, said one must remember that over 2 lakh jobs have been created by the online gaming industry.
Industry executives said they may have to pass on taxes by raising the ticket prices of games.
“The implementation of a 28 percent tax rate will bring significant challenges to the gaming industry. This higher tax burden will impact companies’ cash flows,” Aaditya Shah, chief operating officer at the gaming app IndiaPlays, said.
Roland Landers, CEO of The All India Gaming Federation, said the decision was unconstitutional (and) irrational.
