India's real-money gaming industry witnessed a staggering 412% surge in Goods and Services Tax (GST) collections, totalling ₹6,909 crore during October 2023 to March 2024, as reported by Finance Minister Nirmala Sitharaman at the 54th GST Council meeting on September 9. This increase is attributed to the new 28% GST rate imposed on real-money gaming, which has significantly boosted tax revenues for the government.
For comparison, the GST collections for the six months prior to the new regime stood at ₹1,349 crore, highlighting the substantial impact of the 28% tax on player deposits. Real-money gaming, a key driver of India's $3.1 billion gaming sector, plays a major role in the overall gaming industry's projected growth to $7.5 billion by FY28. The industry had reported revenues of $2.6 billion in FY22, marking a 19% year-on-year growth.
The 28% GST, applicable since October 2023, has been levied on the full face value of player deposits, regardless of whether it's a game of skill or chance. This has caused a sharp rise in tax liabilities for companies, with collections reaching ₹3,470 crore in Q4 2023, up from ₹605 crore in the previous quarter.
Industry Impact: Layoffs and Legal Challenges
The steep tax rate has led to layoffs and shutdowns in the sector, with some startups being unable to sustain operations. Industry executives have reported a 350-400% increase in tax outflows. Although the GST Council has reviewed the tax structure, the status quo remains, with no reduction in rates.
Moreover, India's real-money gaming sector faces additional challenges, including retrospective tax notices totalling over ₹1 lakh crore for alleged tax evasion. The Supreme Court is set to hear a batch of petitions from leading platforms such as Dream Sports and Gameskraft in the coming weeks.
Future Outlook and Regulatory Framework
Despite the challenges, the real-money gaming industry’s future growth hinges on the implementation of a comprehensive regulatory framework and the resolution of legal cases surrounding state-level bans and tax disputes. The government's clarification that the newly introduced Section 11A of the GST Act 2017 will be used sparingly offers some hope for future tax relief in "rarest of rare cases."
As the industry awaits key court decisions, the sector remains a crucial contributor to India's tax revenues, with a 28% GST rate driving significant collections.
CAclubindia
