Countries with thriving online gaming industry levy GST on gross gaming revenue: Report

Most countries with a thriving online gaming industry levy tax on ‘Gross Gaming Revenue (GGR) or the fees charged by online gaming portals, said a report by law firm Lakshmikumaran & Sridharan.

It said countries, like the United Kingdom and France, that are following the turnover tax model currently, are proposing to shift to the GGR tax model.

In India, the online gaming industry currently pays GST at the rate of 18 per cent on GGR amounting to over ₹2,200 crore per year, Lakshmikumaran & Sridharan said.

“Most countries with a thriving online gaming industry follow a ‘Tax on Gross Gaming Revenue (GGR)’ model,” the report said, adding countries where tax is levied on the contest entry amount, there has been a growth in the unauthorised offshore betting and gambling platforms.

The GST Council has set up a panel of ministers to suggest changes in the current GST rate and valuation method for the online gaming sector.

The Group of Ministers (GoM) is understood to have finalised its report and is likely to recommend a GST levy of 28 per cent on online gaming, irrespective of whether it is a game of skill or chance. However, in absence of a consensus on whether the tax should be levied on GGR which is only the fees charged by the portal or on the entire consideration, including the bet amount, the GoM has decided to leave it to the Council to take a final decision.

Lakshmikumaran & Sridharan Executive Partner L Badri Narayanan said countries globally are adopting progressive tax practices that benefit both the industry and the government.

“In India, a departure from international best practices will not only blur the well-established variance between games of skill and games of chance, but also eventually lead to value erosion for more than 500 Indian startups currently valued over USD 20 billion, which have attracted more than USD 2.5 billion in investments and FDI,” Narayanan said.

Currently, India has over 950 gaming companies and more than 500 online skill gaming startups having at least 15,000 game developers with the potential to create 1.6 lakh skilled workforce. With over ₹20,000 crore in FDI, the industry has one listed company and three unicorns, the report said.