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AFK Gaming
‘Online games or gaming’ is used as a blanket term by the Indian government, encompassing all gaming activity, including real money games, fantasy leagues, gambling, or even just harmless video games. Due to the unclear and confusing nature of this classification, whenever the Indian government introduces a Bill, an amendment, or a tax clause aimed at ‘online games,’ it sets off alarms in the Indian Gaming Community (IGC).
In an attempt to counter this, on 6th April, the Ministry of Electronics & Information Technology (MeitY) notified gaming-related amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. According to the Amendment Rules, online real money games are simply a subset of online games.
It defines an ‘online real money game’ as an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit. However, since online real money games (RMG) are fundamentally still online games by definition, companies opt to label themselves as the broader term ‘online gaming companies.’
Recently, on 11th July, the Goods and Services Tax (GST) Council, in its 50th meeting, decided to levy a uniform 28% tax on full face value for online gaming, casinos, and horse racing. The historically ambiguous nature of the government’s definition of online games led to many outlets reporting that all online games would have to pay this tax to operate within the country.
Will you end up spending more money on GST while gaming?
The simplest answer to this question is: No, you most likely do not have to be concerned about paying increased taxes for video games. The GST Council has indicated that it intends to specifically apply the new taxation measures to games that encourage wagering. The increased taxation is expected to hinge on this demarcation, and therefore games of chance or those with betting should be the ones attracting more indirect tax or GST. Games like Dota 2, CS: GO, Valorant or BGMI will likely continue to go by the lower GST (18%).
According to the Economic Times (paywalled), Revenue Secretary Sanjay Malhotra told, “And let me clarify that online games when played without stakes continue to be taxed at 18%. The 28% tax is only when there is wagering on the outcome of a game. Whether it’s a game of skill or chance is not important. It is wagering and that attracts a higher tax rate, as it should be.”
Likewise, Minister of State Rajeev Chandrasekhar stated in an interview that the GST Council’s decision to levy taxes on “online gaming” or games with wagering is a preliminary measure against user harm and money laundering, He also pointed out that there are reactions in the gaming industry calling this move “unconstitutional” but stated that the Government does not make any framework based on knee-jerk reactions and that they are well-planned, sustainable, and consistent.
In a tweet, Chandrasekhar also wrote, “After putting [a] regulatory framework in place, @GoI_MeitY will seek consideration separately for games of skills and for harmful games that involve wagering.”
Additionally, in a statement to its shareholders, Nazara Technologies Ltd (Nazara Tech) also clarified that the 28% GST proposed by the GST Council on online gaming, once implemented, will apply only to the skill-based real money gaming segment of its business.
In short, there is likely no need for gamers to worry about having to pay extra for their favorite video games. However, the GST Council’s proposal is not law yet and we will likely have more clarity when the GST Laws are amended.
Comparing this proposed GST imposition with China’s stringent rules on the number of gaming hours is a bit far-fetched. Reuters reported that many Indian ministers view bets on online gaming platforms as a "social evil" and if revenues fall due to a new 28% tax, it might be in the best interest of the public.
