Industry welcomes GoM’s move to separate taxes on online games

India’s online gaming industry is breathing a sigh of relief following the decision by a Group of Ministers (GoM) to treat online gaming separately from horse racing and gambling while imposing taxes.

In July, the Goods and Services Tax (GST) Council decided to increase the tax on online gaming from 18% to 28%, which the industry has mostly borne. Currently, an 18% GST applies to gross game revenue (GGR).

However, GoM has considered the imposition of a tax of 28% on gross game value (GGV), which is the total value of stakes placed by players, for online games, horse racing and gambling. . This has been criticized by the online gaming industry.

In online gaming, players combine their money to create a pool of prizes, which are then used to pay out winnings. This difference between the deposit and the combined winnings makes up the GRR. Industry experts and stakeholders were worried that imposing 28% GST on GGV would result in a significant increase in taxes paid by the industry and force some companies to close.

According to a report by BCG and Sequoia India, India’s online gaming sector is expected to grow to $5 billion by 2025. Although the sector has seen the emergence of unicorns such as Dream Sports and Mobile Premier League, but it’s still in its infancy.

GoM was formed in May to review GST on online gaming, gambling and horse racing. At their latest meeting on Monday, they decided to hold consultations with the industry and seek legal advice before submitting a final report on the application of the new GST rate. It has also been decided that online gaming will not be combined with gambling and horse racing, where taxes will be fully considered.

Roland Landers, chief executive officer of the All India Gaming Federation (AIGF), an authority in the online gaming industry, said: “GoM recognizes the constitutional and legal differences and nuances of Online games are very promising.

He said the industry hopes that the GoM will make “progressive and constitutional recommendations on rates and pricing for online gaming.”

Rohit Agarwal, founder and director of game marketing company Alpha Zegus, says that online gaming should not be combined with gambling and horse racing.

“They all have different economics, operating processes and profit margins. It just means they’re taxed by their standards, he said.

Jay Sayta, a prominent technology and gaming lawyer, agrees that GOM’s decision to seek a legal opinion is a welcome move.

However, he lamented that the delay in finalizing the report had led to uncertainty for the sector.

He hopes that the GoM will soon make a decision and apply the GRR as is being done in most international markets.

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