NEW DELHI: Despite the initial backlash from the industry, there has been a remarkable 412% increase in revenue from the higher tax on online gaming.
As per finance minister Nirmala Sitharaman, the status report presented to the fitment committee says revenue from online gaming has surged to Rs 6,909 crore in a span of six months, while revenue from casinos saw a 30% rise. In the 50th GST Council meeting held in July 2023, online games — both skill-based and chance-based formats — were placed in 28% tax bracket, a change effective October 1, 2023.
Prior to this adjustment, skill-based games were subject to 18% GST. In spite of rise in revenue, experts feel the industry is being impacted by the higher taxes.
“The government/Council is hinting that the rise in tax rates has not been drastic for the industry. However, that is far from the reality. Multiple reports show the industry has been impacted by 28% rate. The rise in collection post October 1, 2023, can’t be compared to the prior period as the charge of tax was completely different,” said Sashi Mathews, Partner with IndusLaw.
“One must keep in mind that there was a substantive change in levy of tax post October 1, 2023. That is, the levy was introduced on deposits, which was not the case before October 1, 2023. Therefore, it is not a case of rise in revenue from prior period. Prior to that, companies were paying 18% on revenue earned not on deposits. The industry continues to suffer due to high tax rate and it is an impediment for future growth.”
As per Abhishek A Rastogi, founder of Rastogi Chambers, the issue of valuation in online gaming under GST regime is indeed a critical one. While the rate applied to online gaming is important, it is the valuation method that plays a central role in determining the tax liability of gaming companies.
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Abhishek A Rastogi, founder of Rastogi Chambers, says while rate applied to online gaming is important, it is valuation method that plays central role in determining tax liability of companies