The increase in taxation would not only have a catastrophic impact on the industry but also encourage offshore operators who would circumvent Indian tax jurisdiction by hosting games in some other country, Games24x7’s co-chief executive officer Trivikraman Thampy said.
“It would be a triple whammy — the industry loses out, the government loses out on tax revenue and players loses out as they would be exposed to unscrupulous operators,” he added.
An association of online skill-based gaming platforms has made representation before the authorities for retaining Goods and Services Tax (GST) at the current level for the industry which has 400 players employing about 45,000 people.
Online games of skills include e-sports, fantasy games, rummy and poker or chess. Such games are either free to participate or involve real money in the form of platform fees.
The issue has gained traction as the GST Council in its next meeting may take a call on hiking rate on on casino, race course and online gaming services to 28% suggested by a panel of state finance ministers. However, the agenda for the meeting is yet to be finalised.
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A decision on whether the tax should be levied on gross or net valuation would be taken after further deliberations at the officer level.
At present, services of casino, horse racing and online gaming attract 18% GST.
The government had in May last year set up a panel of state ministers for better valuation of services of casinos, online gaming portals and race courses for levying GST.
Online gaming industry is directly linked to the growth of several other sectors such as semiconductor, banking, payment gateway, telecom, fintech, sports and entertainment.
According to Thampy, GST is currently charged on platform fee, termed as Gross Gaming Revenue (GGR), rather than on the entire amount pooled in for a game.
“International best practices also highlight the optimal taxing bracket for the online gaming industry between 15-20%. Our current GST rate at 18% is in line with best practices and reduces the incidence of illegitimate operators,” he said.
Online games of skills are inherently different from games of chance, and that the skill-based gaming industry does not constitute to gambling or lottery, he added.