Although India’s decision to tax casinos, horse racing, and online gaming at a hefty 28% has been deferred, it’s unlikely to be off the government’s table.
The country levies a goods and services tax (GST) at that rate on online games involving betting or gambling. Other online gaming platforms are taxed at a lower 18%. A blanket tax, however, would be unfair and detrimental to businesses, industry insiders and experts say.
India’s finance ministry had in May proposed levying 28% GST on all earnings for all online games. However, following outrage, it decided on June 29 to keep the move in abeyance.
“Taxing online gaming in the same category as betting and gambling sends a very wrong message to the general public,” chartered accountant and startup consultant Mehul Shah tweeted. “This goes against the fact that, unlike betting, fantasy sports are based on skill and expertise.” Games like Rummy and Poker are not up to chance.
The hike would also be at odds with the “prevalent judicial position” that calls for a “differential treatment of games of skill and chance,” said Abhishek Malhotra, the founding partner of New Delhi-based TMT Law Practice.
“Any proposal in contravention of the same is susceptible to litigious action in the future, from gaming enterprises,” Malhotra said.
A 28% tax would cripple India’s gaming industry
Gaming platform WinZO, in a statement issued in response to the government’s initial move to impose a blanket tax, emphasised the “clear distinction” between games of chance or gambling and other online games. It brought out this distinction in terms of consumer demographics and the long-term contribution of these games to the economy.
“To paint the entire online gaming industry with the same brush as gambling…would have serious implications on the development of this sector,” WinZO’s statement said. “Premature over-taxation with the proposed 28% increase would only sink these early-stage companies further into losses, making the industry unviable.”
On the line is the collective future of India’s more than 1,000 gaming startups in the sunrise industry.
In one scenario, these companies could “see an almost 900% increase in taxes,” according to Amrit Kiran Singh, adviser to the All India Gaming Federation (AIGF). Other estimates put the figure at 1,000-1,500%.