India’s online gaming start-ups that offer fantasy and real-money games have written to the government urging it to reconsider the recent decision to impose a 28 per cent Goods and Service Tax (GST) on the full face value of pool deposit. They said that the decision has left the industry in “significant distress” and could have “devastating implications” for the companies, including a shut down of businesses. Taxing online gaming to the point of “unviability,” contradicts the Prime Minister’s vision to be a leader in the online gaming space, the letter, which was signed by Mobile Premier League, Winzo, and industry associations representing companies like Dream11, among others said. The development follows the GST Council’s decision to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing. The government is expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament, which will enable inclusion of online gaming and horse racing under actionable claim and hence, facilitate taxation of these categories with no distinction for game of skill or chance. The companies said that the change will result in an “unprecedented” 400 - 500 per cent increase in GST burden, which the industry “will have no choice but to pass on to 400 million Indians”. “The user, who is already required to pay 30 per cent income tax on winnings, will be unable to bear such a large increase in cost and will shift to black market operators to avoid the increase in playing costs and reduction in the winning pool. This will result in the proliferation of the underground black economy and numerous criminal activities,” they said. The start-ups said that they were willing to pay 28 per cent GST on the platform fee. “.currently, the industry is paying 18 per cent GST on GGR/ platform fee. An increase of GST to 28 per cent on GGR/Platform fee will result in a 55 per cent increase in GST quantum. Even though such an increase will be challenging for the industry, the industry supports this increase to be a contributor to nation-building,” they said. The government however, has said that it does not want to end any industry. “Our agenda is not to end any industry… all types of businesses have to function… There was discussion on the moral question that on one front, you do not want to end an industry. But that does not mean that you give more incentives to them than essential goods… all states participated in this decision which has been pending for the last 2-3 years. We could take the decision because every state clearly participated in it,” Finance Minister Nirmala Sitharaman had said earlier this week.
