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“Immediate and Existential Threat to the Entire Gaming Ecosystem”: A Lawyer’s Concerns On Possible Tax Changes

Malhotra says the reported plan to hike GST on online gaming is “immediate and existential threat: here’s why

State governments are reportedly considering hiking the Goods and Service Tax (GST) rate for online gaming companies' revenues from 18% to 28%. These changes could hit revenues for young online skill gaming companies, dampen user acquisition, reduce foreign investments in the sector, and hurt its competitiveness globally, noted lawyer Abhishek Malhotra, Managing Partner at TMT Law Practice, in a letter to the Prime Minister’s Office.  What's the current status quo?: Online skill gaming platforms currently pay a Goods and Service Tax (GST) of 18% on the Gross Gaming Revenue (GGR). According to the letter, GGR is the money a platform deducts from the total entry fee paid by a player to play a game. States are reportedly considering hiking the tax to 28% for casinos, race courses, and online gaming alike. Crucially, they're not distinguishing between games of skill and chance when doing so, claims Malhotra in the letter viewed by MediaNama. Why does it matter?: Simply taxing 'online gaming' might not be possible—exceptions need to be carved out. Here's why. Gambling, a subset of gaming, is regulated by states in India. It essentially includes games that have been determined to be 'games of chance'—or predominantly won by luck or chance. Most states have banned these games. But, there are games that require quite a bit of brain power to be won—those are 'games of skill'. Some of these have been determined to be legal by courts, and are offered by the 'skill gaming companies' we mentioned earlier. The rumours Malhotra is referring…

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