The Indian government’s recent tax hike on online real money games will have no impact on video games or esports in the country, said the Esports Federation of India (ESFI) in a press release reviewed by MediaNama. In short, Esports will continue being taxed under as ‘other games’ at 18%.
Why it matters: The GST Council recently announced its intent to tax online games at par with gambling, at 28%. The Revenue Secretary subsequently clarified that the tax would only apply to games involving wagering on an outcome. The online real money gaming industry (and its investors) have since repeatedly moved the government to reconsider its decision, arguing that the hike will destroy user winnings, customer acquisition, and industry revenues. ESFI’s statement clarifies who will actually be impacted by the move. It also brings home the video games and esports industries’ dissatisfaction at being grouped with real money online games involving wagering under the ‘online gaming’ banner.
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“Esports has been officially recognized as a sport by the government which finally and thankfully distinguishes it from any and all activities like iGaming such as fantasy, teen patti, rummy, poker, betting, and gambling, among others,” said EFSI President Vinod Tiwari in the release. “It will carry on to be taxed the way it always has been. Theories of ‘game of skill’ [non-gambling games offered by real money gaming companies] and ‘game of chance’ [gambling games] which only exist in our country neither apply nor are relevant in the Esports ecosystem…We must acknowledge the TRUTH that the primary objective of the 400 million Indian video gamers (and approximately 3 billion gamers worldwide) is ‘purely entertainment’, and not financial gains or making money. It is regrettable that in India, our Video Games or Esports Industry is often unjustifiably associated with iGaming, betting, RMG, gambling, and many more, which creates unnecessary confusion and misperceptions.”
Multiple differences between iGaming and Esports: Tiwari added that the GST Council should have used the terms “iGaming” or “online real money games” in its decision to avoid the confusion over which games would be taxed differently under the hike. Another key distinction between online real money gaming and Esports according to EFSI: that video game publishers often have “strict policies” against entry fees imposed in tournaments or events using their games. Esports will also be a medal sport in the upcoming Asian Games, the release added.
MediaNama’s Editor Nikhil Pahwa had this to say on the differences between video games, and the claims made by the online real money gaming industry post the hike:
Something deeply flawed about an industry that claims it’s gaming when it says that its consumers won’t play if they won’t make enough money when they win.
— Nikhil Pahwa (@nixxin) July 13, 2023
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