Is 28% GST on Online Gaming A Setback For Gaming Industry?

The GST Council announced a decision stating that online games would be subject to 28% GST. This decision has come as a shock to the recently flourishing gaming industry in India.

The report published by the GST Council stated that 28% GST would be imposed on total winnings, including the platform fee. Finance Minister Nirmala Sitharaman commented after the GST Council meeting, “We will bring an amendment to GST law to include online gaming, and will be taxed at 28 percent on its full face value.” She also mentioned that the decision was not made under the pretext of aiming for a specific industry.

The gaming industry is currently booming, providing vast employment opportunities for youth in the field of IT and creative professionals such as streamers, e-athletes, engineers, etc. The gaming industry hosts around 500 million gamers and a report published by the All India Gaming Federation stated that it is set to increase by $8.6 million by 2027, growing at a CAGR of 27%. 

Although the gaming industry has boomed in recent years but has seen its fair share of setbacks from the ban on PUBG to state governments imposing restrictions on games to curb gambling addiction. The industry has been very optimistic with the reforms and advancements brought in by the IT rules as well as the TDS administration on net wins. However, experts have concluded that all these would be in vain if the GST regime was not liberal with these changes.

And that’s what they said

Malay Kumar Shukla, secretary of the E-Gaming Federation said, “This is an extremely unfortunate decision, as charging 28% tax on full face value will lead to a nearly 1000% increase in taxation and prove catastrophic for the industry.” 

He added that playing online games is quite distinct from gambling and that judgments by the Indian Supreme Court and High Court have confirmed that playing skill-based online games is a legal activity that is protected as a fundamental right under Indian law.

Roland Landers, CEO of The All-India Gaming Federation remarked, “The decision was “unconstitutional, irrational, and egregious”, ignoring 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities.”

He further added, “We hope that the government will reconsider this recommendation and not implement it, as it will be catastrophic for the 1 trillion dollar digit economy dream of the Honorable PM.”

Industry experts believe that this judgment negates all of the government’s past efforts to advance the gaming industry.