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After Ashneer Grover, the Internet and Mobile Association of India (IAMAI) has also expressed its concern over the new goods and service tax (GST) imposed on online gaming platforms.
On Tuesday the GST Council passed a uniform 28 per cent tax imposition on the full face value of bets involving online gaming, casinos, and horse racing. Putting the tax on online gaming platforms at part with gambling and betting platforms.
As a representative of a sizable segment of India’s online gaming industry, the IAMAI is concerned by the GST Council’s decision to levy 28 per cent GST on the full face value of the consideration instead of just the platform fee.
IAMAI stated that the move would cause many ramifications on India’s digital economy and online gaming industry.
Online gaming companies are different from gambling and betting as these platforms require customers to showcase skill and strategy as opposed to luck.
“Online gaming is distinct from gambling and betting. Hence taxing India’s legitimate online gaming industry with gambling activities will not only massively dent the burgeoning online gaming sector but will also threaten to make the entire $20 billion Indian online gaming sector an unviable business model,” read the statement from IAMAI.
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Potential effect on economy
The current tax sits at 18 per cent, with an increase to 28 per cent, the new rule may affect India’s target to become a $1 trillion digital economy by 2025.
“The net effect of this levy will result in an approximate 1,000 per cent increase in GST on the industry and will cause irreversible damage to the $2.5 billion investments in the Indian online gaming start-up ecosystem and lead to a complete halt on any prospective FDI (foreign direct investment),” the association stated.
It also places Indian companies at a disadvantage in the global online gaming market.
The association also added that the new tax structure was not in line with global best practices. Most countries levy tax on gross gaming revenue (GGR) or the platform fee, as opposed to commissions.
In as much, the industry had proposed a similar tax structure to the GST Council. Instead of imposing a uniform 28 per cent tax on full face value for online gaming, the GST could be applied to the platform fee.
IAMAI, along with other stakeholders, is hoping the Centre will reconsider this tax. IAMAI also added that it “will continue to engage with the GST Council and other stakeholders to ensure that the final GST levels being considered do not hinder the innovation, FDI, and the growth of this industry.”
