ONLINE GAMING INDUSTRY (Syllabus: GS Paper 3 - Economy)

Context:  Softening its stance, the Goods and Services Tax (GST) Council decided to implement a 28 percent tax on electronic gaming, casinos, and horse racing, but this would be applied on the initial amount paid upon entry, and not on the total value of each bet placed.

• The proposed amendments are likely to be introduced from October 1, with a comprehensive review to be conducted six months after implementation.
• Despite dissent from a few states, including Goa, Sikkim, and Delhi, the Council proceeded with the decision without a vote, as the majority of states were in agreement.

Size of this gaming industry

• India’s gaming industry is expected to become a $5 billion industry by 2025, growing at a compounded annual growth rate of 28-30 per cent.
• The real-money gaming segment generated over ?10,000 crore in revenue in 2022.
• Some of the prominent companies in the sector are Games 24*7 which also operates Rummy Circle, Dream 11, MPL, Ace2Three, Gameskraft, apart from several others.
• Currently, online gaming companies pay the government a GST of 18 per cent levied on the Gross Gaming Revenue (GGR) or the platform fee. Besides this, TDS of 30 per cent is deducted on the winnings. 
• Online gamers and poker players did not have any additional impact of GST on the value of bets placed by them, except for the platform fee collected by the online gaming company, till now.
• The high tax rate will make it more expensive for players to participate in online gaming. 
• This could lead to players seeking out offshore or illegitimate platforms that do not charge GST, or that charge a lower rate. 
• This would be a major setback for the legitimate online gaming industry in India, as it would allow these offshore and illegitimate platforms to gain an unfair advantage. 
• This could have several negative consequences, including the proliferation of gambling addiction and the loss of government revenue