Online gaming companies concerned over move to impose higher GST

- GST as high as 5% will be detrimental to new players who want to enter the industry

- Taxing the prize money of online games will affect the business

With the growing number of smartphone users in India, there is a growing craze among teenagers and youngsters to play games on mobile devices. So online game companies are getting open space in India. However, a recent report has raised concerns among online gaming companies.

There were reports last month that the government may consider a single tax rate for online gaming companies and will also examine whether the Goods and Services Tax (GST) should apply only to the amount retained by the platform or the prize money. Should also be charged. Companies in the industry are wary of the possibility that online gaming will now be covered under the Karma framework.

According to experts in the online gaming industry, "a uniform tax rate is the best way for both the platform and its users to move forward with ease of understanding and implementation." The current ezine mandate for online gaming is not very clearly defined and has a lot of potential for misinterpretation.

Of course, while players in the industry in India expect online gaming to come under the 18 per cent GST slab, there are concerns that the government may put the gaming industry under the highest GST tax slab of 5 per cent.

If this assumption comes true and online gaming is placed under the 5% slab, there will be a lot of pressure on the online gaming industry which is still in its infancy in India. High GST can definitely be a barrier to sustaining this business and future investments.

The founder of Ultimate Battle, an online e-sports platform, said having a single tax rate on the gaming industry would help it move forward. However, he also pointed out that the central law defines the laws relating to the game of chance, which are subject to a higher tax of 5 per cent. Skill games / games are not covered by gambling and gaming laws. According to industry standards, 18 per cent GST rate is applicable.

The marketing manager of OpenPlay Tech, a gaming company recently acquired by Nazara Technologies, said there should be a clear distinction between tax rates applied between skill-based gaming platforms and others. In mature and controlled gaming markets around the world, revenue is charged at an average rate of 20%. 5% GST on the amount retained by the platform will also be detrimental to new players who want to enter the industry.

If the 5 per cent GST is placed in the slab, there will be high tax pressure on online gaming platforms as their fees include GST. Of course the impact of higher GST can be offset by increasing the platform fee margin charged from users. But higher fees can have an adverse effect on increasing the number of new users. Platform fees are usually a small amount.

The online gaming platform is also concerned about whether the prize money will be taxable. The companies said that online gaming companies collect a fixed amount from each player for the services offered and collect such amount as 'stack fee'.

Out of such stack fees, a certain portion is deducted and retained by the online gaming company as 'Platform Fee' / 'Rack Fee' / 'Gross Gaming Revenue', and the remaining amount is credited to the Escrow Account, with the winners being rewarded. Is distributed as amount. This platform fee is taxable under GST in online gaming.

It is to be noted here that the money distributed among the players is not revenue for the platform and tax deduction at source (TDAS) is applicable on the prize money. Imposing an extra tax on prize money would be detrimental to gamers and gaming platforms. If GST is levied on the prize money then the gamer will get less amount as the winner as compared to the current situation. The business community believes that taxing prize money will put a heavy burden on the online gaming industry. Charging GST on the full amount of the bet or the prize money will make the industry financially unsuitable for both operators as well as gamers. This will ultimately affect the growth of the Indian gaming industry which is one of the fastest growing online gaming markets in the world.

The online gaming market in India has reached 1 billion

According to a report by KPMG, the market for online gaming industries in India was ૮૭ 50 million in 2012, which has now grown to ૧ 1 billion. It is now expected to reach 4.5 billion by 203. India is one of the fastest growing gaming markets in the world and the number of new paying users has increased by 20%.