15.04.2024: Online gaming industry plans to approach new government for reduction in GST

The online gaming industry plans to approach the new government after the general elections to request a reduction in Goods and Services Tax (GST). They propose that the tax be computed on the Gross Gaming Revenue (GGR) instead of the full face value. This proposal is based on the belief that the current high tax rate is unsustainable for startups in the sector. A person familiar with the matter shared this information.

“After elections, the industry will give representation to the new government to review the 28 percent GST on full face value on online gaming. The industry cannot exist on 28 percent GST on face value. The sector would no longer be a startup ecosystem. The high tax rate will thin out the competition and only bigger players will survive because of the humongous tax,” the person told Moneycontrol.

From October 1, 2023, the GST on online gaming has been levied at full face value instead of GGR. Gross gaming revenue (GGR) is the difference between the amount wagered minus the amount won. Since October 1, the revenue from online gaming has increased 5-6 times from Rs 200 crore to Rs 1100 per month.

“The industry was growing at over 20 percent year on year before October 1, 2023. In six years, at this growth rate, the same revenue of Rs 1100 crore per month can be reached even with the GST computed on GGR. But at least the sector will grow and will be able to compete with the offshore gaming companies which are not registered in India,” the person said.

“The offshore gaming companies are a bigger nuisance which are not even registered in India. The offshore gaming companies are resulting in a huge tax revenue evasion and outflows of funds which will lead to a slowdown in the growth of domestic companies making them unsustainable,” he said.

The Indian online gaming market size is estimated at $2.5 billion while globally, it is worth $159 billion. The government has reportedly identified 114 illegal betting and gambling platforms operating in India.

Many offshore operators masquerade as legal entities offer games and indulge in money laundering. These platforms accumulate funds in proxy accounts and then transfer them via illegal means such as hawala, cryptocurrency, and other illegal channels.

Source: Money Control

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