GST on online gaming sector

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Online Gaming Sector is on rise in India. However, the Online Gaming Sector is also taxable under GST. Therefore, GST on online gaming sector is a must understand concept for everyone including taxpayers, online gamers and gaming businesses. This article explains the important concepts relating to GST on online gaming sector.

How GST applies on online gaming sector in India 

Gaming platforms in India are now obligated to pay GST through GST Return Filing since they are ‘suppliers’ of services under the GST Act.

Payments made by players to platforms to utilize their services are often split between an escrow account (prize pool) and service fees (platform fees) payable by the platforms themselves (gross gaming revenue or GGR).

Upon winning a game, the prize money is automatically sent to the winners’ accounts.

Currently, the GGR is taxed at a rate of 18 percent under the GST Regime. Thus,  businesses in the Online Gaming Sector have to get GST Registration and then collect taxes at 18% GST Rate

Latest updates for Online & Mobile App Games Attract 28% GST

The 50th GST Council meeting, held on July 11, 2023, made a decision that will have a big impact on the online gaming industry, casinos, and horse racing businesses.

The GST Council, with the help of the Group of Ministers, has made recommendations on how GST should be applied to online gaming, and has put an end to the debate over whether online games are games of skill or chance.

A 28% GST will now apply to online gaming, casinos, and horse racing, at the full face value. An amendment will need to be made to the GST law to include this.

In simpler terms, now online gaming, casinos, and horse racing will now be subject to a 28% GST. This will apply to the full value of the bet or the chips purchased, and there will be no distinction between skill-based games and chance-based games.

The Online Gaming Industry vs. Government’s High GST Tax Rate

The industry has disagreed with this move, stating that it will harm foreign direct investment (FDI) and employment prospects.

The industry says that the high tax rate will make India less competitive in the global online gaming market, and will discourage investment and job creation.

The government has countered by saying that it has a moral and social obligation to limit the impact of wagering, and addictive behavior, and protect tax revenues.

The government states that the high tax rate will help to discourage excessive gambling and protect vulnerable people from financial harm.

The final decision on how the GST will be applied to online gaming will be made by the government in the coming months.

However, the industry is already concerned about the impact of the 28% tax rate, and it is likely that there will be further debate on this issue in the future.

Impact of GST on Online Gaming Sector

This year’s gaming sector has witnessed a massive surge in investment and involvement because of events like COVID-19 and Esports inclusion in the Olympic Games.

It’s no secret that India is a significant market for online gaming, from casual gamers to professional esports athletes.

Since online games are not governed by Indian law, the eventual result of this hike would lead to the burden of paying GST on customers, which will only lead to a transfer in users to more financially viable platforms and a rise in offshore involvement.

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