Outrage in India as government hikes taxes on online gaming to 28%

Tax authority says there should be no distinction between ‘game of skill and game of chance’

A visitor plays ac computer game during the opening day of the two-day comic book and cosplay characters convention ‘Bengaluru Comic Con 2022’ in Bengaluru on November 19, 2022 (AFP via Getty Images)

The Indian government has announced that it would impose a heavy 28 per cent tax on the funds collected by online gaming firms from its customers, dealing a blow to the country’s fast-growing industry valued close to $2bn.

India’s Goods and Services Tax (GST) Council, consisting of federal and state ministers, said on Tuesday that it has agreed to levy a 28 per cent indirect tax on online gaming, casinos, and horse racing, adding there should be no distinction between “game of skill” and “game of chance.”

Industry experts have voiced concerns that the increased tax burden on the companies may lead to extra charges levied from customers.

Companies have so far only paid a small tax on the fee charged from customers for playing games involving real money, but Tuesday’s new rule would impose a 28 per cent tax on the amount these firms collect from players in every game, dealing a hefty blow to their operations.

“The implementation of a 28 per cent tax rate will bring significant challenges to the gaming industry. This higher tax burden will impact companies’ cash flows,” Aaditya Shah, an executive at the gaming app IndiaPlays, told Reuters.

The new move also comes amid a number of reports across the country of gaming addiction and financial losses among fantasy cricket players and online card games.

Commenting on the GST Council’s decision, Roland Landers, chief of the trade body All India Gaming Federation which represents firms like Mobile Premier League, Gameskraft, and Paytm First Games, said it is “unconstitutional, irrational, and egregious”.

“This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms,” Mr Landers said in a statement, TechCrunch reported.

Ashneer Grover, co-founder of the Indian fintech company BharatPe and a former Shark Tank India judge, tweeted that the move may pose risks “not only for online games – but across sectors. Across startups.”

“You got billions in from foreign investors as FDI (foreign direct investment). Celebrated FDI inflow! Now the same investors will apply regulatory risk discount to India and funds will dry up,” he said.

“RIP – Real money gaming industry in India....It was good fun being part of the fantasy gaming industry - which stands murdered now,” Mr Grover tweeted.