The online gaming sector in India was valued at over 135 billion Indian rupees in 2022, up from approximately 101 billion rupees the previous year.

By 2025, the market was predicted to be worth more than 231 billion Indian rupees, representing a compound annual growth rate of roughly 19 percent.

According to a report by Mordor Intelligence,” The India Gaming Market size is expected to grow from USD 3,020.24 million in 2023 to USD 6,256.52 million by 2028, at a CAGR of 15.68% during the forecast period (2023-2028).”

The gaming sector indeed looks promising, however with the introduction of the Goods and Services Tax (GST), the industry seems to be unhappy with the move. Let us understand how much tax has been implemented and what implications it has on the gaming industry.

GST on Online Gaming

The Goods and Services Tax Council has decided to collect 28% GST at full value on online gambling, horse racing, and casinos.

A tax on e-gaming would be applied without regard to whether the games demand skill or are based on chance.

According to the finance minister, a discussion was held to determine if an online game is skill-based or chance-based. “We don’t care whether a game is skill-based, chance-based, or both we only care about the value that can be taxed.”

“Very substantive discussions on online gaming took place,” remarked the Finance Minister. MeitY (Ministry of Electronics and Information Technology) is likely to provide a list of games that are included or excluded. Our stance on taxation is unequivocal. “We will continue to follow MeitY’s rules,” Sitharaman added.

However, this decision has not been welcomed by the gaming industry. As the experts feel that this decision might lead to job cuts and a deterrent from companies coming to India.

4 ways the experts feel that the exorbitant tax will push out the upcoming opportunities in India

• Job Loss: The companies would be forced to cut costs to offset the tax burden.
  
• Reduced Investments: The high tax will also discourage investment in the Indian gaming industry. It will make it more difficult for gaming companies to get the necessary financing to expand and innovate.
  
• Increased cost of doing business: The 28% tax will raise the cost of doing business for gaming enterprises. It will make it more difficult for these enterprises to compete with overseas rivals, which will have a negative influence on the expansion of the Indian gaming industry.
  
• Shrinking market: The high tax would also result in a decreasing gaming market in India. This is due to the fact that gamers are less likely to spend money on games. If they know they will have to pay a large tax on their purchases.

How will the tax be calculated?

The GST rate for online games has been made uniform. Now there will be no distinction between the game of skills and the game of chance.

Under the new GST structure, a 28% GST will be levied on the total face value of the bet or consideration paid, rather than the platform charge. That is, for every Rs 100 deposited, the GST will be Rs 28.

Therefore, the GST that online games of skill will have to pay will climb by about 15.6 times under the new regime as compared to the previous one when it was 18%.

Conclusion

The government has justified the tax, claiming that it is vital to oversee the gambling business and prevent it from being used for unlawful purposes. However, industry analysts contend that the tax is unwarranted and will only undermine the industry.

The future of the Indian online gambling business is questionable. The GST has made it more difficult for the business to grow. However, because the industry is still young and developing. It will find a way to adjust to the new tax regime.

Only time will tell how the GST will affect India’s online gaming business in the long run. However, the tax has clearly had an impact on the sector. It will be interesting to see how the industry adapts to the new tax regime.

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