Indian Parliament Approves 28% GST on Online Games: Impact and Implications
In a significant move, the Indian Parliament has given its nod to amendments in the Central and Integrated GST laws, introducing a 28 percent tax on the full face value of bets in online gaming, casinos, and horse race clubs. Spearheaded by Finance Minister Nirmala Sitharaman, these amendments not only bring a tax regulation but also enforce mandatory registration for offshore e-gaming companies operating within India.
Under the newly amended law, the Central GST (Amendment) Bill, 2023, categorizes ‘online gaming’ as any game accessible on the internet or an electronic network. Additionally, the term ‘online money gaming’ refers to gaming activities where players invest money, including virtual digital assets, with the hope of winning monetary rewards or more assets, regardless of the role of skill, chance, or both.
Importantly, casual online gaming without any financial consideration remains exempt from GST, aligning with a more recreational aspect of gaming.
The amendments, endorsed by the GST Council, were met with mixed reactions from some states like Delhi, Goa, and Sikkim. Despite the disagreements, the Council has finalized the 28 percent GST levy on entry-level bets placed in gaming platforms and casinos. It’s worth noting that GST will not be imposed on the winning amount if it’s reinvested in the game, creating a balanced approach.
The decision to impose GST on the full face value of entry-level bets is expected to bolster GST revenues. Currently, the online gaming industry pays GST at a rate of 18 percent on platform fees/commissions, which can range from 5 to 20 percent of the full face value of bets.
The amendments address the industry’s legal ambiguities and stakeholders’ concerns, aiming to provide a more stable and transparent regulatory framework. These efforts are particularly relevant as the online gaming industry has witnessed a substantial 28 percent growth, reaching an estimated USD 1.9 billion in 2021, according to NITI Aayog.
While the GST Council carefully considered the societal impact of online money gaming, including the risk of ‘Internet Gaming Disorder,’ industry voices have expressed apprehensions about the decision’s consequences. Some companies, such as Mobile Premier League (MPL) and Hike-owned Rush Gaming Universe, have already taken measures to mitigate the cost impact, including significant workforce reductions.
In the wake of these developments, the industry’s response will be crucial in shaping the future landscape of online gaming in India. It remains to be seen how companies adapt to the new GST regime and whether these measures will help strike a balance between regulatory concerns and industry growth.
