Online Gaming Companies Claim 28 Percent GST Will Limit Their Business
According to several experts, the government’s decision to tax online gaming at 28% will be detrimental for small and mid-sized companies in particular, according to several. They expect gamers to bear some of the costs directly, which could deter some from playing. It could also restrict industry growth potential and result in job loss; experts further fear this decision could spur players towards using offshore companies which won’t be subject to GST taxation as much.
In a statement issued by the All India Gaming Federation – representing companies like Nazara Technologies, GamesKraft and Zupee – it described this move as unconstitutional and irrational. According to their representatives it will make Indian gaming firms less competitive while hindering investments in this sector. Under this new tax structure players’ total consideration paid will not be assessed like in other industries such as e-commerce; therefore it poses issues for both large and small firms alike, according to this federation statement.
The All India Gaming Federation has petitioned the central government to reconsider their decision and offer an option that won’t disrupt gaming industry operations. Otherwise, legal action may be considered; additionally, tax exemptions for gaming enterprises have also been requested by federation.
Gaming is a multi-billion dollar industry and expanding rapidly. According to the Federation, online gaming generated $5 billion last year and could reach $10 billion by 2025, providing thousands of jobs and making a substantial impactful economic contribution.
One of the key concerns with India’s latest taxation decision is that it will discourage people from playing video games – an especially serious problem given India’s addiction problem to this form of entertainment. Furthermore, this will limit gaming companies from investing in new titles, which in turn impacts revenue and revenues as a whole; higher taxes also make expansion more challenging.
Sitharaman, who chairs the GST council, defended this decision and stated that it does not aim to cripple the gaming and casino industries. She explained that government does not consider gaming and casino taxes essential commodities because this raises moral questions on whether such activities should be taxed similarly as gambling or sports betting.
Experts, however, believe the decision isn’t grounded in sound reasoning and may violate GST provisions regarding taxable supply valuation. According to these experts, the method used to calculate this tax may violate global standards which only tax fees or commissions from platforms; experts see this as potentially being problematic for gaming industry as legal challenges may follow down the line; furthermore it remains unclear how gaming companies will cover these additional taxes without increasing ticket prices further which is likely to deter players.