GST on online gaming sector

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Online Gaming Sector is on rise in India. However, the Online Gaming Sector is also taxable under GST. Therefore, GST on online gaming sector is a must understand concept for everyone including taxpayers, online gamers and gaming businesses. This article explains the important concepts relating to GST on online gaming sector.

How GST applies on online gaming sector in India 

Gaming platforms in India are now obligated to pay GST through GST Return Filing since they are ‘suppliers’ of services under the GST Act.

Payments made by players to platforms to utilize their services are often split between an escrow account (prize pool) and service fees (platform fees) payable by the platforms themselves (gross gaming revenue or GGR).

Upon winning a game, the prize money is automatically sent to the winners’ accounts.

Currently, the GGR is taxed at a rate of 18 percent under the GST Regime. Thus,  businesses in the Online Gaming Sector have to get GST Registration and then collect taxes at 18% GST Rate

Latest updates for GST on Online Gaming Sector

The GST council was researching increasing the tax rates. The increase was expected to be from 18% to 28%.

As a result, a 10 percent GST rate hike for online games would effectively place skill-based, pay-to-play games in the same tax bracket as lottery and horse racing, if rumors and suspicions about the GST council’s suggestions are to be believed.

Furthermore, in this circumstance, the user has the responsibility of paying the GST. It has never been the goal of any jurisprudence on gaming to tax skill-based gamers the same as lottery participants.

Online skill games that you pay to play do not work in the same way as lottery betting and gambling do, hence an exception for “skill games” may require a change to the Act. Thus, In order to put the suggestions into action, the GST Act will need to be amended in order to ensure their application and effect.

Impact of GST on Online Gaming Sector

This year’s gaming sector has witnessed a massive surge in investment and involvement because of events like COVID 19 and Esports inclusion in the Olympic Games.

It’s no secret that India is a significant market for online gaming, from casual gamers to professional esports athletes.

Since online games are not governed by Indian law, the eventual result of this hike would lead to the burden of paying GST on customers, which will only lead to a transfer in users to more financially viable platforms and a rise in offshore involvement.

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