India slaps massive 28 percent tax on online games of skill

India's GST Council seems to have declared war on online gaming – raising taxes on the endeavor to 28 percent, according to the country's Ministry of Finance on Wednesday.

In a tweet, the Ministry shared a number of recommendations from the 50th meeting of the GST council, which included the anticipated decision on gaming.

The ensuing tax rate is not new, but rather a clarification "to further amply clarify and leave nothing to doubt and put this debate to an end with the courts," said an official during a press conference. [VIDEO]

A press release detailed that a group of ministers had looked into tax issues related to online gaming, horse racing and casinos, issuing reports both in June 2022 and for the most recent council meeting.

Ultimately it put the power to tax the segment into the hands of the council.

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Finance minister Nirmala Sitharaman said that whether a game was one of skill or of chance was extensively discussed, but ultimately it was decided to tax both at the same rate. The decision to treat both skill and chance games the same closes a loophole of sorts that skill-based gaming – such as fantasy sports games that allowed bets on real-world matches – used to make such services more popular.

Although those companies that fell in the loophole were issuing currency for their games, they were only paying a small tax on fees charged. The change is expected to impact the industry's bottom line and increase the cost of gaming for customers.

India's gaming sector is on the rise. According to Statista, the industry in the subcontinent grew from $369 million in earnings in 2017 to $2.2 billion in 2022. Before the tax law was clarified, it was expected to progress to $2.8 billion in 2025.

The move has sparked concern that the high tax rate will make it difficult for legitimate tax-paying industry players to operate profitably, fueling a black market gaming sector that cannot be regulated.

But apparently, the council both giveth and taketh away. In the same notice, it was announced that tax rates of "uncooked, unfried and extruded snack palettes" were reduced from 18 to five percent – which honestly is making The Reg a little hungry. ®