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We are now less than a month away from the 48th GST Council meeting that could very well decide the fate of India`s burgeoning online gaming industry.
The 48th GST Council meeting has been fixed on December 17, and the proceedings will be convened through video conferencing. The primary discussions are expected to be on the reports submitted by two Groups of Ministers (GoM): the first on GST Appellate Tribunals and the second on online gaming, casinos, and horse racing.
When last we had reported on the matter, the Group of Ministers (GoM), chaired by Meghalaya Chief Minister, Conrad Sangma, held a virtual meeting on November 22 to finalize their long pending report on taxation of online gaming, casinos, and horse racing. On November 25, CM Sangma announced that the GoM would submit its report to the GST Council in the coming week.
In the November 22 meeting, the panel of state finance ministers proposed that the goods and services (GST) tax for all three gaming sub-sectors be set at 28%, which is the highest slab rate. This would imply a 10% hike in GST for online gaming, as online gaming platforms across the rummy, poker, and fantasy sports verticals currently pay 18% GST on platform fees.
While there is a consensus on taxing these activities at the rate of 28%, according to sources, there are differences between the ministers on the valuation methodology of the tax. The GoM has reportedly been divided on the issue of whether GST should be only on the fees/commission charged by the gaming platforms or the entire prize pool collected in contests or tournaments.
If the GST Council agrees to a single rate of 28% for the three gaming sectors, even though a steep hike, the situation will be manageable for gaming operators who are likely to pass the increased tax burden onto players.
However, should the proposal to change the valuation of the GST on the entire prize money amount is taken up, that would be a massive blow to the industry, perhaps completely destabilizing it in one fell swoop. Insiders consider chances of this happening rare, and a few gaming operators we contacted for comments even indicated legal recourse in such an eventuality.
The GST Council had previously asked GoM to reconsider the proposal on GST changes for casinos as the state of Goa and its representative in the apex GST body, Mauvin Godinho, expressed reservations regarding the adverse impact of the decision on the tourism industry in Goa.
The agenda of the 48th meeting of the GST Council is expected to be finalized in the coming days. Still, the meeting also assumes significance as it comes just ahead of the 2023-24 Union Budget.
As December 17 approaches, the online gaming industry will be waiting with bated breath to see how the future unfolds for them.