GST: India’s online game tax could kill a booming industry
The Indian government’s decision to impose a 28% tax on online gaming poses an “existential threat” to the booming industry and could spell its death knell, say experts.
Shares of Indian online gaming platforms and casinos have crashed following the GST (Goods and Services Tax) Council’s decision.
The country’s 900+ gaming start-ups had been paying a small tax on the fee they charged for offering games. But the imposition of a 28% GST on the full face value of a gaming transaction will mean the entire amount collected from players will now come under the ambit of taxation.
According to industry estimates, total tax collection on player winnings will go beyond 50%, including GST, platform commissions and income taxeswhen the new law is implemented.
In effect, for every $100 (£76.8) spent by a player, there will be a “sunk cost” of $28 towards GST, in addition to a $5-15 charge by the gaming platform and a 30% tax deducted at source (TDS) on any winnings drawn.
This will “disincentivise players and is totally inconsistent with global standards” where VAT or GST is levied at a median rate, and that too only on platform fees or commissions, said Sudipta Bhattacharjee, partner at corporate law firm Khaitan & Co.
“The move has completely blindsided the industry. It will shake investor confidence and lead to a funding winter,” Mr Bhattacharjee added.