Online gaming industry hopes newly-formed government to review taxation structure

Online gaming industry body — Skill Online Games Institute (SOGI) — hopes that the newly-formed government will review the taxation structure of the industry.

From October 1, 2023, a 28 per cent GST on online gaming has been levied on the Competition Entry Amount (or the full face value of bets), while the industry is in favour of the tax being applicable on the platform fee.

Since October 1, revenues from online gaming has reportedly increased 5-6 times from ₹200 crore to ₹1,100 per month. But at the same time the high rate of tax has put the Indian gaming companies at a disadvantage against international companies, which are looking to lure Indian players on their platform with no GST or tax deducted at source (TDS).

Around 71 gaming companies have also received tax notices amounting to around ₹1.12 lakh crore and sources said the industry is unlikely to be able to pay the demand.

OGI founder-president Amrit Kiran Singh said on Tuesday there is an immediate need for the government to consider creating a task force comprising of all stakeholders, including industry and academia, to figure out a proper taxation structure for the industry that will not stifle its growth and development.

The GST Council can then take an appropriate call on what the rates would be for the country that does not create any scope of arbitrage.

“The online gaming industry today is at the same inflexion point that the IT industry was in the 90s. What we do with the industry now in terms of regulation and taxation will determine whether we can grow the industry in the next 30 years,” Singh said.

He said the SOGI is working with academic institutions in India as well as overseas to build a framework that can classify games of skill and games of chance and identify to what extent games of skill may depend on chance.

The central government has blocked around 174 betting and gambling applications in India, but the move may not have yielded the desired impact.

“They do something called domain farming and come up with new addresses and there is no point in just banning these,” said Singh.

He also said that the social issues like addition and losing money can be easily tackled with use of technology.

“Tools can be used to lock people out. Government and industry needs to work together to determine what has to be done to maximise the benefits of the industry and minimise the negatives,” he said.