India's Proposed Gaming Tax Requires $12B from Online Service Providers
India has decided that a 28% tax is fair for all online gaming operators targeting the country. The government believes it can collect INR1 trillion (US$12.03 billion) from these operators, who have reportedly not been paying taxes for years.
According to Reuters, state officials claim the operators must pay the taxes if they don't want to be blacklisted. However, this 28% tax rate was only implemented two months ago.
There's no word from any online gaming operators on their plans yet. But given that some have already left the country, a mass exodus is expected.
GST for All
The GST will be the same for all operators, regardless of whether their activities are classified as games based on skill or luck. Internet gaming comes under the new Central Law on Goods and Services, which covers various online games and gambling activities. Gambling activities involve players placing bets on games with the aim of winning money or virtual assets.
Amendments have been made to the Integrated Goods and Services Act, meaning offshore providers offering online gambling to Indians must charge a GST on all their users in India. To comply with the updated GST regulations, online gambling corporations must carefully evaluate their tax scenarios and modify their ERP (Enterprise Resource Planning) and tax calculation systems.
While the government may be excited about the potential tax revenue, it should not get its hopes too high. Data from Statista in June shows India's online gaming industry was worth around INR135 billion (US$1.62 billion) in 2021.
No matter how India tries to justify the amount it wants operators to pay, the revenue is not there to back it up. It would be more economical and practical for operators to leave the market than to try and satisfy the tax demand.
Unjustifiable and Exaggerated
Online gaming companies, which will soon only be able to offer specific game options, claim they have already been contributing a 18% GST towards platform fees received from each game. But the government views these fees as a negligible portion of the actual income earned.
So, the GST Council has made significant changes to the online gaming taxation rules. All online gaming activities, regardless of whether they're classified as skill-based or chance-based, will now face a flat 28% GST rate.
In comparison, the old system had different GST rates depending on the type of online game being played. Skill-based games like rummy or fantasy games had a lower 18% GST rate, while chance-based games like gambling and sports betting were subject to a higher 28% GST rate.
It's likely that India won't receive even a fraction of the proposed GST. The chances are higher that many operators will bypass the regulated, taxable market.
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Source: www.casino.org
