Maintain Status Quo on GST on Online Games of Skill: Appeals IAMAI

Maintain Status Quo on GST on Online Games of Skill: Appeals IAMAI - Sakshi Post

Internet and Mobile Association of India has appealed to the Union Government and the GST Council to maintain status quo on the online games of skill industry. The current rate of GST on this sector of online skill gaming industry is 18% only on the Gross Gaming Revenue (GGR) and 0% on Contest Entry Fee (CEF). This is legal, fair and in line with international taxation standards for this sector.

In India, 28% GST is imposed on what is considered “sinful consumption”. However, the Supreme Court of India vide judgements – AIR 1957 SC 628, AIR 1968 SC 825 and AIR 1996 SC 1153 has clearly ruled that games of skills are legitimate trades and, are therefore, protected under Articles - 19(1)(g) and 14 of the Constitution. It would be against the letter and spirit of the Supreme Court’s judgement to equate games of skill with games of chance - gambling, betting or wagering. 

Online skills games also provide the most transparent mechanism for accounting GST. The nature of transactions being completely digital ensures there is almost zero leakage in revenue. Online games have paid a cumulative Rs. 6,000 crores GST since the last four years and are likely to pay Rs. 16,000 crores between 2022-2025. It is estimated that a major portion of this comes from online games of skill, given the transparent, measurable, and non-cash mechanism that this sector follows. 

Imposition of further 28% GST on GGR would increase the incidence of taxation to about 55%, which is patently unfair for an industry which is considered to be a legitimate trade - profession and not a game of chance. It would make it unviable for the vast majority of players (consumers), negatively impacting net GST collection from the sector. Globally, many jurisdictions in EU, UK, US etc. levy tax only on the GGR. Studies show that a tax rate on the GGR between 15-20% provides the most favourable returns to the tax authorities.

In addition, unfortunately if 28% is imposed on the CEF - the incidence of GST shoots up nearly 10 times (1100%). Thus, it is very likely that the industry and GST revenue thereof will cease to exist.

According to the association, the impact of any changes in the current incidence of GST would mean that many of the offline service providers will go underground leading to further revenue leakages on one hand, and on the other, for the online games of skill it would tantamount to killing the proverbial goose that lays golden eggs.

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