Update: Indian Government to Levy 28% Tax on ‘Gaming’

Credit: GST Council/Photo by Leon Dewiwje on Unsplash

Update: Our original story published on India’s GST Council proposing a hefty tax on games/online games was incorrect (at least for now). The 28% tax is squarely aimed and gambling and wagering. From the GST Council report:

A Group of Ministers (GoM) was constituted to look into the issues related to taxation on
casinos, horse racing and online gaming. The GoM submitted its first report in June, 2022 and
it was placed before the GST Council in its 47th GST Council meeting wherein, it was decided
that the GoM may relook into all the issues once again. The GoM submitted its report and it
was placed before the 50th GST Council meeting. The GoM, in its second report has
recommended that since no consensus could be reached on whether the activities of online
gaming, horse racing and casinos should be taxed at 28% on the full-face value of bets placed
or on the GGR, the GST Council may decide. The GST Council has deliberated on the issues
and has recommended the following:

o Suitable amendments to be made to law to include online gaming and horse
racing in schedule III as taxable actionable claims.

o All three namely Casino, Horse Racing and Online gaming to be taxed at
the uniform rate of 28%.

o 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 and on the full value of the bets placed in case
of the Online Gaming.

In short, the tax would be aimed at online gaming that involves real-world money wagering, and not “online gaming” as we might refer to it. The source of confusion for us (and other publications) is that the Indian government has struggled to define and separate gambling products from video game products in past discussions on policy.

Original Story: Following a recent meeting in New Delhi, Indian federal agency the Goods and Service Tax Council announced that it will levy 28% tax on the full value of online gaming, horse racing, and casinos. Much to the dismay of gaming and esports companies in the country, the new policy lumps all of these things into one category and doesn’t differentiate between gambling and gaming.

Established in 2016, the GST Council is a federal agency consisting of the Union Finance Minister and representatives from all Indian states and union territories that has the authority to make decisions on various aspects of taxation on goods and services within the country, and sets policy on tax rates, exemptions, and administrative procedures.

In announcing the new policy the GST Council appears to have gone out of its way to note that it makes no distinction between a “game of skill” (a competition that likely involves a video game) and a “game of chance” (gambling wagering, fantasy betting, casino-style games, etc.).

The esports and gaming industries in India have fought hard to make sure the government understands the difference between applications that promote gambling and wagering, and actual games that provide users with competition, but it seems that the government and politicians in India continue to struggle to understand the difference.

Several stakeholders in esports and gaming in the country issued statements through their PR representatives pushing back on this new policy including social gaming network Qlan and gaming and lifestyle marketing agency Alpha Zegus:

“The decision of the GST council to impose a 28% tax will have a significant impact on the online gaming industry, which unfortunately includes the Esports community,” said Qlan Co-founder and CEO Sagar Nair. “While we understand that the government needs to impose such measures on casinos, horse racing, and gambling, the higher tax rate is not justified for the competitive gaming community. It can discourage new players from entering the market as their hard-earned earnings generated through their efforts just like mainstream athletes will be taxed on the same level as those involved in gambling and other such practices. For the Esports industry to continue its unprecedented growth and recognition on the international stage, it is vital for the government to treat Esports as a separate category with reasonable tax rates that would support the development of the sector.”

“Yet again, esports being included in the same domain as online gaming, horse racing, and casino, has put our industry at a major disadvantage,” noted Alpha Zegus Founder & Director Rohit Agarwal. “While the government might have fair reasons to impose higher GST on horse racing and casino winnings, imposing the same rules on an industry like esports doesn’t seem fair. Esports does not only have a ‘win or lose’ situation basis luck but has a very big element of skill that determines the outcome of the game. This is not what I expected, and our fight to separate esports from other labels still continues.”

The Esports Advocate has reached out to the GST Council for further comment and will update this story if it should respond.

Editor’s Note: This story was updated on July 13 because it incorrectly stated that a tax would be levied on video games/online gaming.