Play online, and you might end up paying 28% more than once

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As if the onslaught of 28% GST was not enough, online gaming companies now have a new worry. Since many players use their winning amount from one game as an initial deposit for another, all funds could potentially end up being doubly taxed. And due to this, the tax incidence on regular gamers could end up going as high as 60%.

While the GST council has summarily dismissed any possibility for modifications in this levy in the near future, any kind of repetitive taxation is against the principles of GST. 

What does this mean? 

Trend suggests that players of card and fantasy games usually end up playing at least 3 times with their win amount. So, how will this repetitive taxation impact your deposits by the end of these 3 games? 

By the end of 3rd game, your effective winning amount is slashed by Rs 809.93, to Rs 190.07 from Rs 1,000, a massive 80.99% dip. And this is when the win rate is a solid 100%, which is generally not the case. But even with relatively higher winning rates, the winning pool over continuous games would boil down to nothing. This could prove catastrophic for the 400 million+ online gamers in the country. 

Even though MeitY minister Rajeev Chandrasekhar has hinted towards establishing a dialogue with the GST council on this matter, stakeholders in this space, which include gaming companies and their investors, are eagerly awaiting further clarifications on this matter.

“Every stakeholder has raised this issue. We believe that levying GST on face value at each game will severely impact the engagement of the user with the platform. It will make the cost per game prohibitive and may cause unsuspecting users to move towards illegal offshore gambling websites”, Roland Landers, CEO of All India Gaming Federation informed media. 

Says Malay Kumar Shukla, Secretary, E-Gaming Federation, “Charging 28% GST on every contest played every time with fully taxed winnings will increase the GST burden by 1100%. In addition, owing to the taxation of redeployed player winnings, the same money will be taxed repeatedly resulting in a situation where 50-70% of every rupee will go towards GST. Such an impact will make the online skill gaming business model unviable and lead to a potential write-off of the $2.5 Billion capital invested in this sector. In addition, the proposed GST framework will set up the most onerous tax regime which will significantly erode investor confidence and impact prospective investments worth at least $4 Billion over the next 3-4 years”.