As of October 1, 2023, a uniform 28% GST is levied on the full face value of bets placed in online games, regardless of whether they are considered games of skill or chance. This was a significant shift from the previous regime where games of skill were taxed at 18% on the platform’s service fee.
The 28% Hammer Explain the sudden imposition of 28% GST on the full face value of bets, treating all online games as “actionable claims”to gambling. Use an example: “A player depositing ₹100 now effectively pays ₹28 in tax, leaving only ₹72 for the game itself, drastically impacting prize pools and player engagement”
A major point of contention and dispute in the industry is the government’s stance on retrospective taxation.Online gaming, along with horse racing and casinos, are now treated as “actionable claims” under the GST Act, similar to lottery, gambling, and betting.
The Supreme Court of India is currently hearing consolidated petitions regarding the 28% GST, especially concerning its retrospective application and the distinction between skill-based and chance-based games for tax purposes. The industry is hopeful for clarity and a potential review of the tax policy.
Impact on the Industry:
Financial Burden: The 28% GST on full face value significantly increases operational costs for gaming startups and established platforms, many of which operate on thin margins.Many companies have reported significant revenue declines or stagnation since the new GST came into effect. Some have even faced losses, leading to workforce reductions
Emotional impact
“This isn’t just about tax numbers; it’s about the future of a vibrant, innovative industry that promised to put India on the global gaming map. The GST decisions have turned a promising growth story into a high-stakes legal battle, with thousands of jobs and billions in investment hanging in the balance.”
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