GST on amount of contest entry for online games not in line with global best practice – News235


Report of the main legislative agency of India – A report by Lakshmikumaran & Sridharan offers a detailed description of the tax regime adopted by the major countries of the world.

  • Note that almost all major economies, including the UK, US, Australia and Singapore comply with the ‘Gross Gaming Revenue Tax (GGR)’ model.
  • Warns of lack of revenue for the Government of India and proliferation of illegal offshore gambling and gambling platforms

Ahead of the GST council meeting on December 17, Lakshmikumaran & Sridharan (LKS), a premier full-service Indian legislative agency specializing in tax, has in a detailed white paper presented global best practices in GST for online games. According to the report, most countries with a thriving online gaming trade adhere to a ‘Gaming Gross Revenue Tax (GGR)’ model. He also cites examples of countries where excessive taxation and/or incorrect competition participation amount (CEA) taxation led to loss of revenue for authorities and inspired the expansion of unauthorized offshore gambling and gambling platforms. .

In India, the web gaming industry currently pays GST on the 18% fee on GGR which amounts to more than INR 2200 crore per year. The report comes at a time when the Group of Ministers panel on Casinos, Racing Programs and Online Gaming (GoM) is most likely to advocate a 28% GST tax on online gaming, regardless of whether it is or not a recreation of talent or chance, and should leave final ruling on calculation technique to the GST Council. The GoM panel had previously been very helpful with a 28% CEA tax for the online gaming industry, which would make the industry unviable.

GST on the amount of contest entry for online games that are not in line with world best practices

Commenting on the report, L Badri Narayanan, government shill, LKS mentioned “International locations globally are adopting progressive tax practices that benefit both the industry and the authorities. Through our research, we found that the ‘GGR Tax’ model for online gaming offers probably the most environmentally friendly and win-win relationship, allowing the industry to develop responsibly while at the same time includes revenue for the treasury.”

added, “In India, a departure from global best practice will not only blur the well-established difference between games of talent and games of probability, but will also ultimately lead to an erosion of the value of more than 500 Indian companies today. valued at more than USD 20 billion, which have attracted more than USD 2.5 billion in investment and FDI. A prudent tax regime for the sector will plug the potential for revenue leakage and illicit financing while supporting the expansion of the ambitions of India’s digital economic system.

The report also highlights the essential case investigation from the UK and France and recommends that the GST Council consider it. Previously, the UK was imposing 6.75% on CEA. However, it quickly switched to 15% GST on GGR as the faster tax model was driving bookies into offshore tax havens, resulting in a lack of revenue for the government. The report further noted that the change from the turnover tax rate from 7% to GGR of 15% in the UK led to new investment and created employment opportunities.

France, one of the largest nations by GDP to have regulated online gaming, was following the model of taxing CEA. However, in 2020, the French Senate proposed a bill of funds to modify the tax model from CEA to GGR regarding the calculation of the gambling tax, because it realized that the industry was being unfairly taxed on cash that it was not his income.

The report notes that the proposed increase in the construction tax from 18% on GGR to twenty-eight% on CEA will improve the legal tax liability of gambling companies by more than 1455% of the current amount, closing the curtains on professional operators and giving rise to the proliferation of illegal offshore operators. As global markets unilaterally adopt the GGR model, the report states that India wants to contemplate sustainable global practices and favor progressive laws on a prohibitive tax regime to appreciate the collective imagination and knowledge of a ‘digital India’.

India currently has more than 950 game companies and more than 500 online talent game startups with at least 15,000 game developers with the potential to create 1.6 lakh skilled workers. With over INR 20,000 crore worth of FDI, the trade boasts of a publicly traded company, three unicorns and plenty of ‘soon’. Furthermore, the Supreme Court of India and various High Courts have always held that online talent games are distinct from gambling and betting, considering the former to be a professional exercise protected by Article 19(1)(g) of the Structure from India.

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