28% GST on real-money gaming: AIGF urges govt to defer rollout
The All India Gaming Federation (AIGF), which serves as the industry body representing leading skill gaming companies in India, has reportedly made a request to the finance ministry. They are seeking a suspension or reconsideration of the recent notification that announced the imposition of a 28 percent Goods and Services Tax (GST) on online money games, effective from October 1.
As of September 29, the finance ministry had officially notified October 1 as the implementation date for the new GST rates for online money games, in accordance with their initial plan. This decision was made despite the fact that around a dozen state governments had not yet passed the necessary amendments to their respective State GST (SGST) laws.
The AIGF’s appeal for the suspension or reconsideration of the GST rate hike likely stems from concerns within the online gaming industry about the potential impact of this tax increase. Skill gaming firms may be seeking more time to adjust to the new tax regime or advocating for a different taxation structure that they believe would be more equitable or conducive to the growth of the industry. The matter of taxation in the online gaming sector is complex and often involves both state and central governments, making it a subject of ongoing discussion and negotiation.
In a letter addressed to revenue secretary Sanjay Malhotra dated September 30, CEO Roland Landers of the All India Gaming Federation (AIGF) expressed strong concerns regarding the recent notifications related to Goods and Services Tax (GST). In the letter, which Moneycontrol has had access to, Landers highlighted the perceived negative implications of these notifications.
Landers asserted that these notifications go against the principle of “one nation, one tax,” which is a fundamental tenet of the GST system. He argued that the implementation of a 28 percent GST rate on online money games from October 1 could potentially disrupt the harmonious functioning of the GST framework and damage the unity it seeks to establish across the country.
Furthermore, Landers suggested that such actions might set a precedent for unilateral actions by various states in different aspects of GST in the future. This raises concerns about the potential for further fragmentation and complexities within the GST structure.
The AIGF represents a substantial number of members in the gaming industry, with over 120 members, including skill-gaming companies and game developers across various formats and genres. Prominent members of the federation include well-known entities like Mobile Premier League (MPL), Gameskraft, Nazara Technologies, Deltatech Gaming, Head Digital Works (A23), and WinZO. The AIGF’s advocacy for a reevaluation of the GST rate for online money games reflects the broader concerns within the gaming industry regarding taxation and its potential impacts on the sector’s growth and operations.
he industry body has requested a deferral of the new tax regime until all states pass their respective amendments in line with the GST scheme, and until the Supreme Court’s judgment on the alleged Rs 21,000 crore GST evasion case against Gameskraft is delivered during its final hearing in the coming weeks.
This situation suggests that there may be concerns within the industry and among businesses about the new tax regime and its potential impact, particularly in light of the pending legal case. Deferring implementation until the Supreme Court’s judgment is delivered and all necessary amendments are made by the states appears to be a cautious approach to ensure clarity and fairness in the new tax system.
The situation you’ve described highlights the legal and regulatory challenges faced by skill gaming companies in India, particularly in relation to the Goods and Services Tax (GST) regime. Here’s a breakdown of the key developments:
1. Supreme Court Stay : On September 6, the Supreme Court stayed the Karnataka High Court’s judgment that had quashed the GST department’s show-cause notice. This decision led to a series of retrospective tax notices being issued to other skill gaming companies, creating uncertainty within the industry.
2. Legal Challenge by Dream Sports : Dream Sports, the parent company of Dream11, challenged a show-cause notice issued by tax authorities in the Bombay High Court. This move reflects the legal battles that gaming companies are engaged in to address GST-related issues.
3. Industry Concerns : Skill gaming executives and legal experts have expressed concerns about the impact of the 28 percent GST regime and changing tax interpretations on the industry. They argue that these factors have made it challenging for gaming startups to operate, potentially jeopardizing the industry’s viability.
The gaming industry in India has been grappling with various legal and regulatory issues, including concerns related to the classification and taxation of online gaming platforms. The outcome of these legal battles and any changes in tax policies could have significant implications for the future of the skill-based gaming industry in the country.
An AIGF (All India Gaming Federation) spokesperson has raised concerns about the tax complexities faced by real-money gaming companies in India due to the current implementation of the Goods and Services Tax (GST). According to the spokesperson, the issue revolves around differences in GST laws across states, specifically regarding the levying of central GST (CGST) and state GST (SGST).
In states that have not amended their GST laws, these gaming companies are required to levy CGST but not SGST. Conversely, in states that have amended their GST laws, these companies must levy both CGST and SGST. This creates a complex situation for companies operating in multiple states, leading to uncertainty and transition challenges.
The spokesperson emphasized that companies are already dealing with significant operational changes and hope for a reasonable transition period from the government. They are concerned that such a scenario could result in different amounts of taxes being collected and deposited across the country, potentially causing a breakdown in the fundamental structure of GST.
Furthermore, the AIGF’s letter also questioned how technical systems will be modified to address this anomalous scenario, highlighting the practical challenges faced by businesses in adapting to these tax changes. Lastly, the spokesperson expressed concerns about the rushed implementation of amendments to the GST laws, which could render certain provisions unusable and lead to additional operational and legal challenges for real-money gaming companies.
The real-money gaming segment in India has been a significant contributor to the country’s gaming sector revenues. According to a recent FICCI-EY report, in 2022, the real-money gaming segment accounted for 77 percent of the gaming sector’s revenues, which totaled Rs 13,500 crore. The report also projects substantial growth in this segment, with revenues expected to reach Rs 16,700 crore in 2023 and further increase to Rs 23,100 crore in 2025.
However, in July 2023, the GST Council made a significant decision related to the taxation of the gaming industry. They decided to impose the top GST slab of 28 percent on the full face value of gaming transactions, regardless of whether the games are based on skill or chance.
To provide some relief to the industry, on August 2, the GST Council recommended that GST should be levied on deposits made by players instead of applying taxation to every individual bet placed. Currently, real-money gaming platforms are subject to an 18 percent GST on platform fees.
The GST Council, led by Finance Minister Nirmala Sitharaman, indicated that they would review this decision six months after its implementation. The next GST Council meeting is scheduled to take place on October 7, which may provide further updates or revisions to the taxation framework for the gaming industry in India. These decisions and discussions are critical for the real-money gaming sector, given its significant contribution to the overall gaming revenues in the country.
