GST Council Meet Today: The online gaming industry is closely watching the 54th Goods and Services Tax (GST) Council meeting as it awaits a potential review of the 28 per cent GST levied on deposits. The industry has been grappling with high taxation, which stakeholders argue has led to growth in grey market operators.
Ashish Philip, partner at Lakshmikumaran and Sridharan, highlighted the industry’s expectations for clarity. “On the implementation of 28 per cent GST on deposits for online gaming, it was promised to review the impact on stakeholders after six months of implementation. The industry expects the 54th GST Council meeting to review the impact of high rates of taxation levied on the sector and the growing trends of grey market players.”
While the matter is currently sub judice before the Supreme Court, the gaming industry hopes the GST Council will provide guidance on the newly introduced Section 11A, which concerns show-cause notices issued for previous periods. “Additionally, the industry players are also looking forward to some clarifications on issues such as valuation and the treatment of discounts, promotions, and incentives under the new deposit-based regime,” added Philip, reflecting the concerns shared by stakeholders.
Smita Singh, partner at S&A Law Offices, emphasised the industry’s appeal to shift the tax calculation to gross gaming revenue rather than the full transaction value. She noted, “Clarity on the retrospective levy of GST on online gaming will provide a lot of certainty to online gaming companies, many of whom have been served show-cause notices demanding GST of thousands of crores, particularly the startups.”
Despite these demands, the government seems reluctant to make immediate changes. “Due to the current scenario and the revenue involved, this issue may, in all likelihood, take a backseat for some time,” added Singh.
Stringent GST rates continue to challenge the online gaming sector
There has been significant debate over the GST Council’s stance on taxing online gaming, with the sector subject to a high 28 per cent GST rate on full transaction values, including entry fees and stakes. Critics argue that the stringent tax rate is stifling growth and deterring investment in the sector, particularly for startups and smaller gaming companies.
“The online gaming industry is subjected to one of the highest GST rates in India, reflecting a stringent approach by policymakers,” said Smita Singh.
“While the high rate is intended to maximise tax revenue, it has potentially hindered growth and investment in this sector and impacted profit margins for gaming companies, potentially affecting their overall financial health,” she added.
Insurance industry pushes for GST relief on premiums
The GST Council has also been fielding demands from insurance companies seeking relief on the tax structure for premiums, particularly for health and life insurance policies. The insurance sector, along with consumer advocacy groups, is calling for a reduction in the 18 per cent GST rate, which they argue is making policies less accessible to the average consumer.
“The demand from insurance companies for a reduction in GST rates on insurance policies reflects broader concerns about the financial burden of high taxation and its impact on the industry and consumers,” said industry experts.
“An 18 per cent GST rate makes insurance products more expensive and less accessible to the average consumer, which can deter individuals from purchasing new policies and may even lead to existing policyholders choosing not to renew their coverage,” they added.
First Published: Sep 09 2024 | 1:36 PM IST
