Online gaming may likely face 40% GST in the new regime

With the Government proposing to overhaul the GST regime with a special rate of 40 per cent on “sin and demerit goods”, the top slab is likely to see online gaming, among other sectors.  The Department of Revenue has kept in mind the country’s “social ethos” while tagging goods and services in this category, and online gaming is seen to be fitting that definition. If finalised, it is likely to cause an upheaval among online gaming companies.

After Prime Minister Narendra Modi’s announcement about reforms in GST, official sources said that the Centre has proposed a rate structure with continuation of special rates on gold, silver, unpolished diamond etc, two basic slab rates (5 and 18 per cent) and maximum applicable rate of 40 per cent on 5-7 sin goods.

The final picture on the new rate structure will emerge by October.

At present, online gaming attracts GST at 28 per cent along with casinos and horse racing. Industry fears that this rate is already high, and further increase will lead to more disruptions. While the government’s intent may be to regulate the space, equating online gaming with sin goods like tobacco and gutkha reflects a fundamental misunderstanding of the industry’s nature and value. The industry apprehends that such a move risks mass closures, layoffs and a sharp decline in investor confidence, all of which could set the Indian gaming economy back by years.