India: Group of Ministers likely to recommend raising online gaming taxes from 18% to 28%

A Group of Ministers (GoM) tasked by the Goods and Services Tax Council in India may recommend raising the goods and services tax (GST) on online gaming from 18% to 28%. On Friday, Meghalaya Chief Minister Conrad Sangma said that the GoM would submit its report to the GST Council during the course of this week. 

However, in the absence of consensus on whether the tax should be levied on only the fees charged by the portal or the entire consideration, including the bet amount received from participants, the GoM has decided to refer all the suggestions to the GST Council for a final decision.

Currently, online gaming attracts 18% GST. The tax is levied on gross gaming revenue, which is the fees charged by online gaming portals. According to local news, there will not be any further deliberations at the GoM level, and the report will be submitted to the GST Council for consideration. The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising her state counterparts, is the apex decision-making body for GST-related matters.

The GoM in its earlier report submitted to the council in June had suggested a 28% GST on the full value of the consideration, including the contest entry fee, paid by the player without making a distinction such as games of skill or chance. However, the council had asked the GoM to reconsider its report. 

Tamil Nadu Finance Minister P Thiaga Rajan said: "There was already a report submitted once. That report will be the basis of whatever the new report is."

Although the GoM deliberated on separate definitions for 'games of skill' and 'games of chance', it finally decided to tax both as demerit goods attracting a 28% GST. The message has to be clear that online gaming is a demerit good, the group believes. However, some relaxation in valuation methods could be provided, sources told The Indian Express. 

The GoM report in June suggested that the GST should be levied on the entire amount received as consideration from the participant. Experts had said that charging a 28% GST on the entire amount, which a player deposits for a game for both categories of online game, would reduce the prize money left for distribution and drive away players from legitimate tax deducting portals. This may also encourage online gamers towards unlawful portals that do not deduct tax.

Online gaming witnessed a spurt during the time of the Covid lockdown, with the number of users in India rising substantially. As per a KPMG report, the online gaming sector would grow to Rs 29,000 crore by 2024-25 from Rs 13,600 crore in 2021.

The 8-member GoM includes Thiaga Rajan, Maharashtra Deputy Chief Minister Devendra Fadnavis, Finance Ministers of West Bengal (Chandrima Bhattacharya), Gujarat (Kanubhai Desai), Uttar Pradesh (Suresh Kumar Khanna), Telangana (T Harish Rao), and Goa Industries Minister Mauvin Godinho.