Tag: online gaming tax

Betting-Based Online Gaming Firms Said to Face Rs. 1 Lakh Crore GST Notices

India’s online gaming industry has received show-cause notices amounting to Rs. 1 lakh crore say sources. The notices come even as the industry has raised concerns on the applicable GST Rates.

The government has asserted that a 28 percent GST rate should have been in place starting from October 1, as per the law.

In August 2023, the GST Council amended the law, making it explicit that all online games involving bets, regardless of skill or chance, would be subject to a 28 percent GST rate on the full value of the bets placed, effective from October 1. This clarification aimed to close any potential loopholes.

The Central Board of Indirect Taxes and Customs (CBIC) Chairman, Sanjay Agarwal, announced India’s preparedness to implement this 28 percent GST rate on online gaming, following consensus among all Indian states. The amendments to GST laws in the Lok Sabha paved the way for this taxation shift.

During its last monsoon session, the Lok Sabha passed amendments to two Goods and Service Tax (GST) laws. These amendments primarily aimed to introduce a 28 percent GST rate for online gaming, casinos, and horse racing.

The amendments align with the GST Council’s resolution from August 2, which aimed to streamline the taxation of online gaming, casinos, and horse racing.

Furthermore, to ensure compliance, the GST Council recommended adding specific provisions to the Integrated Goods and Services Tax (IGST) Act, 2017.

These provisions encompass the liability to pay GST on the supply of online money gaming from foreign suppliers to Indian customers, along with measures to address non-compliance.

The valuation of online gaming and actionable claims in casinos will be based on the amount paid or payable to the supplier, excluding previous winnings, ensuring a consistent and clear approach to taxation.

India’s endeavour to tax online gaming falls within the broader efforts to bring various sectors under the GST framework, ultimately aiming to streamline tax collections and clarify tax rates for these growing industries.

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Offshore Online Gaming Companies in India Mandated to Register Their Business

The Indian government has mandated offshore online gaming companies operating in the country to register the business locally or appoint a representative to pay tax on funds collected from customers.

Last week, India decided to levy a 28 percent tax on total funds collected by online gaming companies from gamers, and not on every bet.

Overseas online gaming companies operating in India will be blocked if they fail to register or appoint a representative or a proxy to pay tax in the country, according to amendments moved in Parliament on Friday.

“Offshore online gaming companies will not enjoy any tax arbitrage, and would be treated at par with their domestic counterparts,” said Rajat Mohan, a partner at AMRG & Associates.

The move to tax online gaming companies has shocked the nascent $1.5 billion (nearly Rs. 12,430 crore) industry, which is backed by global investors. Over 100 gaming companies and top investors such as Tiger Global and Peak XV have written to the government, asking it to reconsider the decision.

“The decision (has been) taken after elaborate deliberations spanning over a period of about 3 years,” said a source.

On Wednesday, Indian gaming app Mobile Premier League said it would lay off 350 employees as it takes steps to “survive” the tax imposed by the government.

India’s finance minister and state ministers considered the negative impact of online money gaming “on the society and the youth in particular, in form of Internet Gaming Disorder due to addiction to online gaming,” the source said.

The move “is not a ban, it is just a tax on online money gaming which is nothing but gambling by any name, and it deserves to be taxed at the highest rate,” the source said.

The tax will not be applicable on online games that do not involve money.

© Thomson Reuters 2023

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India’s New Online Gaming Tax Will Stifle Foreign Investment, Put $2.5 Billion Investment at Risk: Gaming Firms

India’s new 28 percent tax on online gaming companies will stifle foreign investment and put $2.5 billion (roughly Rs. 20,500 crore) already invested in the sector at risk, more than 100 gaming firms have said in a letter to India’s finance ministry.

India this week announced the tax on the funds that online gaming companies collect from their customers. Games such as fantasy cricket have became increasingly popular in recent years, but have also raised concerns about addiction among players.

Top investors including Tiger Global and Peak XV, previously known as Sequoia Capital India, have invested in Indian gaming companies such as Dream11 and Mobile Premier League.

In the letter dated July 14, gaming companies including MPL urged the finance minister to rethink the move, highlighting the impact on jobs and investment.

The tax would deter potential investors, both domestic and foreign, from considering the online gaming sector in India as a viable investment destination, the letter said, and added that the current $2.5 billion (roughly Rs. 20,500 crore) plus in investments is at stake based on this decision.

India’s finance ministry did not respond to an email request for comment, sent outside usual business hours. Federal Revenue Secretary Sanjay Malhotra told Reuters in an interview this week that the government believes social as well as economic purposes will be served by the tax.

Many Indian ministers view bets on online gaming platforms as a “social evil”, Malhotra had said.

Revenues of fantasy gaming platforms rose 24 percent during the Indian Premier League cricket season from a year earlier to more than $342 million (roughly Rs. 2,800 crore), with over 61 million users participating, Redseer consultancy said this month.

Users can create a fantasy cricket team for as little as Rs. 8.

© Thomson Reuters 2023

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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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