Uniform 28 per cent tax on online gaming: What the GST Council’s decision says, its implications

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Recently, the Goods and Services Tax (GST) Council decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing.
Soon, it may bring in a legal amendment for this, which will facilitate taxation of these categories with no distinction for game of skill or chance.
At present, most gaming companies were paying a tax of 18 per cent applicable on the platform fees, distinguishing based on the factor of these activities being games of skill such as fantasy gaming platforms.
Online gaming companies have raised concerns about the impact of this move on the industry, as it is likely to affect volumes and thus the viability of gaming companies.

The uniform levy of 28 per cent tax will be applicable on the face value of the chips purchased in the case of casinos
- On the full value of the bets placed with bookmaker/totalisator in the case of horse racing
- On the full value of the bets placed in case of online gaming.
The government will bring in amendments to the GST-related laws to include online gaming and horse racing in Schedule III as taxable actionable claims.
- In the context of GST, an actionable claim is defined as goods under the Central Goods and Services Tax Act, 2017.
- It is a claim to an unsecured debt or a claim to any beneficial interest in movable property that is not in the possession of the claimant.
- So far, lottery, betting, and gambling were classified as actionable claims.
- Now, horse racing and online gaming will be added.
The GST Council’s decision focused on the taxation part of online gaming and it will align with the regulation of the Ministry of Electronics and Information Technology (MeitY).
- Recently, the IT Ministry had notified rules for online gaming intermediaries, allowing for the creation of self regulatory bodies that will decide what is a permissible online game.

The Union Finance Minister, who heads the GST Council, said the intent was not to end any industry but rather a “moral question” about taxing both gaming at the same rate as other “essential items”.
- About not giving more incentives to them than essential goods
The decision is taken with the active participation of the states.

The decision has been applied indiscriminately to gaming and gambling platforms.
- This includes companies that have spent years in lobbying efforts to create a distinction between a game of skill and game of chance, essentially trying to distinguish themselves from gambling platforms.
As such, online gaming is perhaps the only segment of the internet economy that has multiple highly profitable companies.

The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025.
The industry in the country grew at a CAGR of 38% between 2017-2020
It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024.
India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India
- Also, the number of paying gamers increased by 17% from 80 million in 2020 to 95 million in 2021.

From calling the decision “unconstitutional” to suggesting that it will benefit illegal gambling platforms in the country, statements released by online gaming companies showed the deleterious impact they are estimating on their business.
The decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses.