28% GST on online gaming: Rajeev Chandrasekhar says will go back to GST Council to review

Minister of State for Electronics and Information Technology Rajeev Chandrashekhar on Monday said that his ministry will go back to the GST Council and ask for reconsideration of the decision to impose a 28% tax on funds that online gaming companies collect from their customers.

“We will go back to the GST Council and may be request their consideration on the facts of the new regulatory framework,” the minister said during an interaction at the CNN-News18 Town Hall event. The minister further said that the government is at the  initial stage of creating predictable, sustainable online gaming framework.

“The GST Council is not the Government of India. The council is represented by all state governments. It is a federal organization. State governments and finance ministers have come together and created a GST framework. That is a consequence of three years of their work. While we may quibble with the findings, we have to recognize the process of creating a framework for online gaming, started in January 2023,” he said.

More than 125 companies from India’s online gaming industry warned the government that the sector could face a massive loss of investments and jobs following a decision by the Goods and Services Tax Council to increase tax rates sharply as reported by Bloomberg.India’s online skill gaming industry has an enterprise value of $20 billion, after having raised over $1.5 billion between January 2021 and June 2022, according to the letter. The industry claims to employ around 100,000 people with revenues of $2.5 billion, forecast to double by 2025.

The GST Council has agreed to impose a 28 per cent tax on online gaming, casinos and horse racing. The tax would be levied on the full face value.

Online gaming players have repeatedly urged the government and the GST Council to levy 18 per cent GST on their segment instead of 28 per cent that was recommended by Group of Ministers (GoM).

"The implementation of a 28 per cent 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," IndiaPlays COO Aaditya Shah said.

He also said that skill-based games and apps engaged in betting or casinos should not be treated in the same manner.

*WIth inputs from agencies