Indian Finance Minister Nirmala Sitharaman has postponed a proposal to levy a 28% GST on casinos, online gambling, horse racing and lottery. The Group of Ministers (GoM), led by Meghalaya CM Conrad Sangma, has been asked to re-deliberate the tax rate on horse racing, online gambling and casinos by July 15. Currently, an 18% GST is levied on these avenues, known as Gross Gaming Revenue (GGR). Experts believe that the proposed 28% GST on entry/deposit fees will have a negative impact on the gambling industry. According to them, the new recommendation is at odds with global best practice and will effectively increase the tax that companies pay 1,000 to 1,500%. And that worries game companies. Also Read – Maruti Suzuki’s New SUV To Be Unveiled This Month: Report
“It will force companies to pay taxes on the money they don’t earn. In other words, it is more than the margin that companies make. This will likely shut down the industry with immediate effect and drive valuations to zero. Moreover, taxing games of skill on the same basis as games of chance, and under the entry of gambling into the Constitution, is contrary to several court decisions on this point,” said Dibyojyoti Mainak, SVP, Legal and Policy, MPL at BGR.in. Also Read – Battlegrounds Mobile India Surpasses 100 Million Registered Users on Android, iOS
The GoM has recommended that online games be taxed at the full value of 28%, including the contest entry fee paid by the player when participating in the game. The new tax will transfer the tax burden to players and will ultimately reduce the prize pool. This would lead users to switch to gaming platforms in other countries. Some experts say this could leave many online gamblers quitting betting platforms like fantasy sports, rummy and poker. This could further force Indian online gaming companies to move overseas. Also Read – Government to Finalize GST on Online Gambling in August 2022, Says FM Nirmala Sitharaman
“The market has operated in a way where a clear distinction exists between gambling or gambling on the one hand and all other forms of online games and sports on the other hand. There is a fundamental difference in the nature of these two forms of service, their consumer demographics as well as their long-term contribution to building an admirable nation-state Painting the entire online gambling industry with the same brush as gambling placing it in the same tax bracket is 28% from the current 18% would have serious implications for the development of this sector,” noted the WinZO spokesperson.WinZO is an e-social gaming platform mobile sport.The platform offers more than 70 games, including carrom, cricket, bubble shooter, fruit samurai, knife up, memory mania, fantasy league and trivia based questions.
According to KPMG, online gaming is an emerging industry in India and has shown robust growth due to the increasing number of wireless internet users and smartphone base. Data usage per telecom subscriber increased from around 0.4 GB per month in 2015 to around 10.4 GB per month in 2019, with a corresponding drop in data cost over the same period.
Also, the widespread adoption of digital payment mechanisms such as Unified Payment Interface (UPI) (UPI transaction value increased from 2 trillion rupees on January 20 to 4 trillion rupees on January 21) has also been a key growth driver for online games. Real-money games, including card-based games and online fantasy sports segments, have seen strong traction in recent years, due to the high affinity of Indian users to pay for games if there is a monetary incentive.
“For an industry like online gaming, which is still in its early stages of growth and recognition, raising higher tax slabs would impede growth and act as a barrier for growing businesses, developers, creators and game organizations. The higher tax slabs may come after a few years once the industry has reached a stage similar to the biggest entertainment sectors in India,” Rohit Agarwal, Founder and Director of Alpha Zegus, the new marketing agency generation specializing in the areas of play. and lifestyle, concluded.
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