GST Authority Issues 1 Lakh Crore Notice to Online Gaming Firms: Seeks GST Response
Online gaming companies related to Goods and Services Tax (GST) have been issued notices for a whopping ₹1 lakh crore by the authorities. This information has been provided by a senior government official. This matter is expected to come into effect from October 1, 2023, where online gaming services will be subject to a 28% GST rate instead of the previous 18% GST on goods and services.
28% GST on Online Gaming from October 1
It should be noted that, starting from October 1, online gaming will be subject to a 28% Goods and Services Tax (GST). In July, the GST Council had announced a 28% GST on online gaming, horse racing, and casinos. This final decision was reached during the 51st meeting held on August 2. So far, these games were taxed at 18%.
Recently, Sanjay Agarwal, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), stated that from October 1, a 28% GST would be imposed on online gaming. He mentioned that the legal notice would also be served to gaming companies as part of its enforcement. A review of its implementation will be conducted after six months.
28% Tax Will Only Apply at the Entry Level
The tax will be imposed only at the entry level. Consider that you’ve deposited 100 rupees to play a game. On this amount, a 28% GST will be applicable. Now, if you win in the game and your money increases to 200 rupees, you won’t withdraw the 200 rupees; you continue playing. Therefore, this additional 200 rupees will not be subject to the 28% GST.
How Big is the Online Gaming Market in India?
Around 400 million people in India are actively engaged in online gaming. By 2025, the industry is estimated to be worth $5 billion, or approximately ₹41,000 crores. Between 2017 and 2020, the local mobile gaming industry has witnessed an annual growth rate of 38%. The pace of growth in this industry is the fastest in the world. Following India, China and the United States have gaming growth rates of 8% and 10%, respectively.
