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Continuing GST rate of 18% essential for wellbeing of online gaming industry: IAMAI

As per the Association, any increase in the GST rates in this sector will be detrimental to the overall wellbeing of the industry, seriously impacting the industry’s contribution to the nation’s economy through revenue generation, livelihood creation and foreign investments

The Internet and Mobile Association of India (IAMAI) has urged the GST Council to continue maintaining the GST on online gaming at 18 percent.

Through a statement issued on Monday, IAMAI said that for real money games in particular the GST should continue to be levied on the Platform Fee only at the rate of 18 percent. Any increase in the GST rates in this sector will be detrimental to the overall wellbeing of the industry, seriously impacting the industry’s contribution to the nation’s economy through revenue generation, livelihood creation and foreign investments.

The Association noted with concern that there is an ongoing discussion to increase the GST taxation rate to 28 percent for the online gaming industry. There is also no clarity on whether this will apply only to real money games or casual games as well, given that the former being a sub-segment of online gaming. Further, as per the statement, it is worried that as per the reports circulating in the media that for real money games this may be applied to the entire Contest Fee.

IAMAI is of the opinion that any such increase in the GST rate is likely to turn businesses in the sector unviable, leading to complete shutdown, which in turn will result in loss of a large number of jobs and a loss of investor-confidence debilitating India’s online gaming industry, which is currently witnessing fast and exponential growth of 35 percent CAGR.

That apart increasing the GST rate will lead to an erosion of tax-base on the one hand, and encourage the spawning of grey markets on the other.

The Association said that due to Prime Minister Narendra Modi’s vision to develop India as a powerhouse in the global gaming industry, the formation of the AVGC Taskforce in the Budget 2022 and several ongoing initiatives under the various ministries, the online gaming industry in India has scaled new heights during the difficult COVID times.

“It has been a catalyst to the development of high-end technologies and forms a significant part of the digital ecosystem. As of 2021, there is a sizeable consumer base of around 2.7 billion users globally, while the domestic market is projected to touch $ 5 billion by 2025, making it instrumental in creating the workforce of the future and a critical element of revenue generation,” it said.

“The key to long term sustenance of the industry lies in continuing to levy the GST at 18 percent on online gaming as provided for under “Other Online Content Not Else Where Classified” – entry 998349. It is also essential to treat only the Gross Gaming Revenue or Platform Fee as liable to GST at 18 percent and to treat the ‘prize pool’ as the actionable claim as per Entry 6 of Schedule III of the CGST Act, 2017,” it added. 

Bearing in mind the benefits brought to the nation’s economy by the online gaming industry, IAMAI has requested the GST Council to retain stability in the taxation regime for the industry.

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