A GST Council Meeting was held at Chandigarh on the 28th and 29th of June 2022. In this meeting, the Goods and Service Tax (GST) on lots of goods were revised. But, the GST council postponed the decision to levy a 28% tax on the online gaming segment. The council has asked the Group of Ministers (GoM) to submit their inputs by 15th July 2022.
A GST revision from 18% to 28% is enormous. Such an aggressive tax hike has made the online gaming industry worry about its future growth plans.
Overview of Online Gaming Sector in India
The online gaming sector is growing at a slow pace. But, the tax collection figure from the sector is quite impressive. According to a report by Business Standard, the sector has contributed Rs. 1,450 crore in FY21. Moreover, in the last six years, the sector has received foreign investments of over $2 billion and employs around 50,000 people.
Now, to understand the impact on the online gaming sector, you must first understand two important terms - Gross Gaming Revenue (GGR) and Gross Gaming Value (GGV)
Usually, when you enter an online gaming platform, you have to pay a certain amount as a participation fee. This fee is pooled and is given to the person who wins the game. From this pooled amount, the platform cuts a certain amount as commission for providing the service.
This commission is the revenue source for online gaming companies, called the Gross Gaming Revenue (GGR). An 18% GST is currently levied on this GGR amount. While the total money deposited by users, which is the participation amount plus commission, is called the Gross Gaming Value (GGV).
Now, the online gaming companies are worried about which amount the government will levy GST - GGR or GGV?
What Lies Ahead?
Amrit Kiran Singh, the adviser to the All India Gaming Federation (AIGF), said, “Applying GST on Gross Gaming Value (GGV) will lead to almost a 900% increase in taxes, which will kill the emerging gaming industry."