An in-depth study on the impact of GST on online gamers in India has revealed that 62 per cent online gamers are discouraged by heavy tax deductions on their winnings from playing online games. This deduction has been a cause of concern for players who invest their time, skills and effort in these games and expect to receive their winnings with reasonable deductions.
The research is conducted by EPWA in collaboration with Youth Ki Awaaz. It divulged that a significant chunk of respondents were not even aware of the tax levied on winnings due to a lack of awareness around the matter. This has contributed to a substantial knowledge gap among players regarding their tax obligations.
A striking 60 per cent players expressed their likelihood to stop playing online games if a 30 per cent tax deduction was to be imposed on their winnings. This finding underscores the sensitivity of players to tax burdens and the potential consequences. Given that the Indian online gaming industry has the potential to create millions of jobs and help support the economy, the survey concludes that 61 out of 100 online gamers would refrain from playing online games due to the increased tax burden. The majority of them also believe that professional gaming should not be taxed at the same rates that are applicable to betting and gambling, as this is a skill-based profession.
It is important to note that the higher GST rates will increase the burden on the online gaming company to collect taxes from the players indirectly, which will be deposited by the gaming company. The gaming companies shall be left with two choices: they will impose taxes on the gamers or bear such a burden. The proposed changes in tax rate will increase the financial burden on the gaming industry as now they will become liable to pay tax on those portions of the money as well, which does not in any manner contribute to generating revenue for these companies.
The study provides valuable demographic insights into the interests of online gamers. Findings from the pool of 11,000 respondents it appears that the users in the age group of 20-29 years is more engaged in playing online games, with a higher dominance of the male population than female. Additionally, in the age bracket of the e-gamers, 69.8 per cent ranged between 20-29 years, 13.4 per cent under 20 years, 13.9 per cent of players between 30-39 years, 1.9 per cent between 40-49 years and the rest 1 per cent were above the age of 50 years.
The extensive study concludes with recommendations that the authorities should:
- Refrain from charging GST on the entire money and continue charging GST only on the GGR (Gross Gaming Revenue).
- The legislation should acknowledge that money won from online gaming is not a mere matter of chance but the gamer’s skill and there should be a clear distinction between online gaming on one hand and lottery, betting, gambling and casino on the other; refraining from putting them under a single umbrella.
- The GST Council should consider the Information Technology Act and allied rules to remove its constraints. The reluctance to separate online gaming from lottery, betting, gambling and casino should be given up.
Taking into account the proactive measures to support the growth and development of online gamers:
- Policymakers should refrain from putting hefty taxes on online gaming. The policy makers have overlooked that gaming companies and online gamers invest much human capital to generate revenue. Innovation is the core of online gaming. The online gaming industry invests a lot in developing a user-friendly and grasping game, giving gamers a realistic look and feel while playing games. The only way to generate revenue is through the platform fee.
Closing the findings with a crucial statement, the report states that the gaming industry believes that higher taxation may reduce the attractiveness of online skill-based gaming and can even impact foreign direct investment inflows, existing employment as well as future employment opportunities, investment in marketing and information technology services, and ancillary industries.