Source: News18

GST Council set to bring 28% tax on Online Gaming

Newsroom Jun 29, 2022

A flat rate of 28 per cent GST can be applied to popular online gaming, casinos and horse racing as suggested by the group of ministers (GoM)
Conrad Sangma, the chief minister of Meghalaya, led a group of ministers that advocated taxing internet gaming at the full value of the consideration, including the contest entry fee that players pay when they play the game.
Currently, 18% of people use casinos, horse racing, and online gaming services. The manner of valuing the services and how the GST would be applied to them will probably be decided by the GST Council in this two-days meeting.

Headed by the finance minister, Nirmala Sitharaman, the GST Council is set to schedule its 47th meeting from 28th June to the 30th of June. This meet have will discuss several upgrades and degradations in GST rates on pulses, diamonds, e-vehicles, lithium-ion batteries, and much more.

What should interest us and what actually is the most controversial part of this meeting, is the fact that the GST council is set to announce a shocking 28% GST deduction in all forms of transactions in the fields of online gaming, horse betting, and casinos.  However, it's still not clear as to whether the government will distinguish Esports gaming from fantasy-based online betting games, the fact that 28% of GST will be added in all forms of transactions is a massive headache for game development and Esports event organizing companies.

Let’s uncover everything we should know and what the future of gaming holds after this shocking news.

GST Council on Gaming and Fantasy Betting Apps

The GST Council is anticipated to take into account a proposal from a group of state finance ministers to impose a 28% goods and services tax (GST) on internet gambling, gambling establishments, and horse racing. Conrad Sangma, the chief minister of Meghalaya, led a group of ministers that advocated taxing internet gaming at the full value of the consideration, including the contest entry fee that players pay when they play the game.

The GoM proposed that GST be applied to the whole value of bets placed with bookmakers and pooled in totalisators on racetracks.

Source: Sean Do (Unsplash)
Source: Sean Do (Unsplash)

In casinos, GoM advised that the tax be applied on the entire face value of the chips or coins that a player has purchased from the establishment. The mandatory inclusion of food, beverages, and other items in entry/access fees to casinos will be subject to a 28% GST.

Currently, 18% of people use casinos, horse racing, and online gambling services. The manner of valuing the services and how the GST would be applied to them will probably be decided by the GST Council in this two-days meeting.

Controversial Element

As clear as it may sound the government of India is trying to impose tax upgradations on online gambling-based applications and the transactions related to it, we should note that as of today, there is no such official distinction between them both.

Online gaming will remain mere gaming, whether it is gambling based or some Esports-related. This should more of a concern as the Chief Minister of Meghalaya, Conrad Sangma, before the start of this 2-day meeting, suggested that the GST deduction of 28% should be applied to all forms of transactions, including the contest fees and the prize money given post that.

Source: Tarun Savvy (Unsplash)
Source: Tarun Savvy (Unsplash)

If what is said so far, remains the way it is, it would essentially mean that Esports players will be taxpayers of 28% GST from either the participation fee or the prize money given to them.

Need for a ‘Centralized Approach’ for the gaming industry

NASSCOM said in its reaction to the proposed bill, that the focus for gaming should be on an assisted action between the Centre and the states for gaming specifically. "Instead of adopting a legislation regulating online gaming, the GST Council may consider partnering with the federal government's task force on gaming to express its unique concerns and proposals," it stated.

While India has a federal framework, which allows the states to set their own laws, several Esports players believe that if there is a national policy for esports, it will be simpler for state legislatures to pass legislation.

The majority of Esports Gamers believe that the gaming industry as a whole should come under the control of states as originally intended. The Centre, on the other hand, should assist states in developing their policy frameworks to include crucial concepts for them to use in developing their own policies.

It's vital that the Center establishes a precise definition of esports that can be used across states. Fantasy sports, like esports, have contributed to the promotion of sports culture. It was emphasized that the very legality of operations should be redefined.

Conclusion

Let’s understand the bigger picture. Combining two very different concepts of real-time gaming may have a financial and mental impact on Esports athletes. Esports athletes, according to various players, are generally between the ages of 16 and 20. Families' attitudes will be influenced if the definitions of fantasy sports and Esports are muddled.

Furthermore, it raises the likelihood of Esports being outlawed. If this occurs, players from that state will either be unable to compete in the tournament or would be forced to relocate to another state, which will have a financial impact on the participants.

If you’re more interested to know about such latest news on the gaming industry as a whole and something more specifically related to the Esports, you should check out the following blog:

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Until next time,

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