Leading online gaming companies in India have appealed to the Central Board of Indirect Taxes & Customs (CBIC) to refrain from increasing the Goods and Services Tax (GST) rate for the sector from 18% to 28%, as recommended by a group of ministers (GoM).
Representatives of the gaming firms, including Dream11, Nazara, Winzo, Krafton, MyTeam11, and MPL, have submitted a representation through the FICCI Gaming Committee expressing their concerns. The companies emphasized that the proposed tax hike would significantly impact the online gaming industry under the new tax regime.
In their letter to CBIC Chairman Vivek Johri, the gaming companies argued that they merely provide a platform for users, and only the income generated by these companies should be subject to GST. They urged the board to treat the online gaming industry at par with information technology service providers.
The companies highlighted that the proposed increase in GST and the proposition of charging GST on the entire stake value, regardless of the rate, would be detrimental to the online gaming industry. They warned that such a steep hike would push startups and new ventures toward extinction, potentially driving away companies and investors from the sector.
The adverse effects of the tax hike on the online gaming industry would have a broader impact on government tax revenue and the economy, the companies emphasized.
The gaming sector in India has already experienced regulatory uncertainties and fluctuations, leading to a decline in funding. In 2022, gaming startups raised $349 million, an 80% decrease compared to the previous year. The average deal size also decreased by 38% compared to 2021.
Currently, a tax rate of 18% is imposed on the commission collected by online gaming platforms for non-betting or non-gambling games.
The GoM, led by Meghalaya Chief Minister Conrad Sangma, submitted its second report on the taxation of online gaming, races, and casinos to Finance Minister Nirmala Sitharaman in December. CBIC Chief Vivek Johri had previously stated that online games dependent on specific outcomes would attract 28% GST on the full bet value.
