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Companies Differ on Proposed GST Tax for Online Gaming in India

As the GST Council is set to meet for a second time in less than a month to discuss taxation of online gaming, a difference of opinion has emerged among the companies in the segment. While some large companies are now ready to accept the proposed 28% tax, several smaller companies believe that the tax should be levied on the gross gaming revenue (GGR) rather than the value of player deposits. The issue was debated last week by industry executives at a meeting of the gaming committee of the Federation of Indian Chambers of Commerce and Industry.

There is resentment among smaller players that they are being treated unfairly, with larger companies taking an opposing stance that is detrimental to them. The All India Gaming Federation (AIGF) proposed dividing online gaming into ‘large-size tournaments' vs ‘quick continuous games'. But the AIGF argues that regardless of how the tax is levied, it will result in the closure of most of the industry, including MSMEs, gaming startups, and even established players.

The AIGF suggests that the tax should be applied to net deposits, which is the deposits made by players net of withdrawals, for all formats of skill gaming. They believe this will lead to increased revenue for the government while allowing all companies, including MSMEs, to grow.

Another group of big companies supported the 28% tax but wanted it to be levied on GGR. They believe that any increase in tax would affect the entire industry, but stronger players would find it relatively easier to survive.

Industry bodies Federation of Indian Fantasy Sports and E-Gaming Federation, representing large platforms such as Dream11 and Games 24×7, have consistently advised that the valuation for the online skill gaming industry should remain on the GGR as it has been. They argue that alternative valuations, such as entry fees or deposits, would severely impact the industry and harm the 40 crore Indian gamers. They also state that a 28% GST on deposits would lead to the closure of smaller operators and require major restructuring for larger operators.