West Bengal Minister of State for Finance Chandrima Bhattacharya on Tuesday (July 11) said the GST Council has agreed to levy 28 percent goods and services tax (GST) on the full value of online gaming, horse racing, and casinos, with no distinction between games of skill and chance.

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"Will bring an amendment to GST law to include online gaming and will be taxed at 28 percent on full face value," finance minister Nirmala Sitharaman said after the GST Council meeting.

However, the effective date for the 28 percent GST levy on online gaming will roll out after amendments to GST law, the West Bengal GST Council Representative Bhattacharya said. Currently, services of casinos, horse racing, and online gaming attract 18 percent GST.

Bhattacharya said the council has also approved the exemption of GST on import of cancer drug dinutuximab, and food for special medical purposes (FSMP) used in the treatment of rare diseases. Also, the West Bengal government has agreed to have two benches of the GST Appellate Tribunal in Kolkata.

Sudhir Mungantiwar, Maharashtra Forest Cultural and Fisheries Minister, said the council has decided to do away with the distinction of the game of skill and chance in the case of online gaming. Twenty-eight percent tax would be levied on the full face value of bets, Mungantiwar said.

Mungantiwar added that the council has also approved the setting up of appellate tribunals.

Joy Bhattacharjya, Director General of the Federation of Indian Fantasy Sports, said the decision of the council was very unfortunate and terrible for the online gaming industry.

He said 28 percent GST is high and a killer blow for the online gaming industry and for consumers, "The consumers do not have an opportunity for the amount of money that they play with and they will get far less in return and for a game of skill as well."

Further, Bhattacharjya said, "Almost $4 billion of FDI was supposed to come into this industry. Now looking at this, this completely retrograde step, you can see that that capital is very unlikely to come into India, given the fact that this industry will be absolutely crippled."

Third, startups in the online gaming industry will not be able to survive this tax, he said, urging the government to reconsider the decision as it's a death blow for the industry. It's a very, very difficult step for the industry to face.

Roland Landers, CEO of All India Gaming Federation (AIGF), said the decision to levy 28 percent GST is extremely unfortunate and high taxation will not benefit anyone in the industry.

The AIGF CEO pointed out that the only side which will benefit from high taxation will be the illegal betting or gambling industry and the startup industry in the online gaming industry will be completely wiped out.

Sudipta Bhattacharjee, Partner at Khaitan & Co, said the 28 percent rate is detrimental to the online gaming industry, the chargeability on full value is what is going to hurt the gaming companies to an extent it may lead to its extinction.

He said the Council's action is completely against the vision of the government to promote online gaming in India. The findings of the Karnataka High Court in Gameskraft with respect to the distinction between a game of skill and a game of chance has not been appreciated.

"It will need to be seen if the prescribed methodology to tax online gaming will pass the test of constitutionality. In any case, this cannot be implemented retrospectively," Bhattacharjee added.

Amrit Kiran Singh, the chief strategy advisor to the founders of Gameskraft, said GST on GGV is a self-goal that will kill India's skilled online games industry. It negates all the good work that the Modi government has done to support skilled online gaming.

"Today's decision at the GST Council is not in the national interest as it will destroy a significant portion of the successful companies in India's start-up ecosystem. Unfortunately, it also appears to show that the different limbs of the government are not in sync. This is a self-goal that causes a body blow to India's start-up ecosystem," Singh said.

First Published:Jul 11, 2023 6:56 PM IST