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18 May seems to be a D-Day for the online gaming sector as the Group of Ministers (GoM), chaired by Meghalaya chief minister Conrad Sangma, has unanimously decided to impose 28% Goods and Services Tax (GST) on casino, race course and online gaming services.

All kinds of online gaming will attract a GST of 28%. The structure on which GST will be levied has also been approved by the GoM.

The GoM met again on Wednesday and finalised the method of valuing these services for the purpose of levying this tax.

The GoM report will be submitted in a day or two. It will be taken up in the upcoming GST Council meeting.

"The Group of Ministers (GoM) on casinos, race courses & online gaming has come to a consensus. The report of our submissions will be handed over to Hon'ble FM, Smti. @nsitharaman Ji in a day or two & the matter will be presented in the next @GST_Council Meeting," Sangma tweeted.

Currently, services of casino, horse racing and online gaming attract 18% GST.

The government had in May 2021 set up a panel of state ministers for better valuation of services of casinos, online gaming portals and race courses for levying GST.

Industry views on 28% GST on online gaming

"While the industry had made representations that grouping online games with betting/gambling would be a big hit to all market players, however, it seems that no such bifurcation would be made," Ankur Gupta, Practice Leader- Indirect Tax, SW India, has said.

He further said, "In most countries, the online gaming industry is taxable more or less at par with the current taxability of 18%, therefore, it's a disadvantage for Indian game companies if the taxability moves to 28%."

"Now what has to be seen is the valuation of these services. It should be applicable only on margin/platform fee because in case it is applicable on the entire pool value then it would adversely impact the customers, as well as they would get less playable value," he added.

The increase in taxation would not only have catastrophic impact on the industry but also encourage offshore operators who would circumvent Indian tax jurisdiction by hosting games in some other country, Games24x7 Co-CEO Trivikraman Thampy had earlier told PTI.

"It would be a triple whammy -- the industry loses out, the government loses out on tax revenue and players loses out as they would be exposed to unscrupulous operators," he had said.

An association of online skill-based gaming platforms has made representation before the authorities for retaining GST at the current level for the industry, which has 400 players employing about 45,000 people.

Online games of skills include e-sports, fantasy games, rummy and poker or chess. Such games are either free to participate or involve real money in the form of platform fees.

Online gaming industry is directly linked to the growth of several other sectors such as semiconductor, banking, payment gateway, telecom, fintech, sports and entertainment.

According to the Games24x7 Co-CEO, GST is currently charged on platform fee, termed as Gross Gaming Revenue (GGR), rather than on the entire amount pooled in for a game.

"International best practices also highlight the optimal taxing bracket for the online gaming industry between 15 and 20 per cent. Our current GST rate at 18 per cent is in line with best practices and reduces the incidence of illegitimate operators," he said.

Online games of skills are inherently different from games of chance, and that the skill-based gaming industry does not constitute to gambling or lottery, he added.

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