GST Council Levied 28% GST on Online Gaming & Casinos

The Goods and Services Tax Council decided to levy 28% GST on online gaming, horse racing, and casinos at full value, Union Finance Minister Nirmala Sitharaman said after the conclusion of the council’s 50th meet on Tuesday. 

Simultaneously, there has been a decision to lower the tax rate for uncooked/unfried snack pellets, cancer medicine, and imitation Zari thread. 

The tax imposed on online gaming companies will not differentiate between games based on skill or games based on chance. The taxation will be applied uniformly, without considering the nature of the games, FM said.

Regarding online gaming, casinos, and horse racing, Sitharaman expressed that the intention was not to eliminate any associated industry. However, there were deliberations on the moral aspect of whether these activities should be taxed at the same rate as essential items. 

The tax would be imposed based on either the full value of bets placed or the full value of consideration paid. Previously, the ministerial panel responsible for online gaming, casinos, and horse racing had explored an alternative option of levying tax on gross gaming revenue or platform fee, which refers to the charge paid for accessing gaming services. However, this option did not receive support. 

According to some industry executives, there is a possibility that the increased tax burden may lead to an increase in ticket prices for games. 

The implementation of a 28% tax rate will pose significant challenges to the gaming industry. This higher tax burden will have an impact on the company’s cash flows. 

The All India Gaming Federation (AIGF), which represents companies such as Nazara, GamesKraft, Zupee, and Winzo, criticised the council’s decision, deeming it unconstitutional, irrational, and egregious. 

Furthermore, the GST rate for food and beverages consumed in cinema halls will now be 5%, aligning it with the rate charged in hotels and restaurants. This adjustment replaces the previous 18% rate that many cinema halls had been charging for composite food packages. 

Following the aforementioned news, several listed players such as Nazara Technologies, Delta Corp, and OnMobile Global are experiencing downward pressure and are trading at lower values. 

When examining the revenue breakdown of Nazara Technologies by segment, the majority of their revenue, accounting for 49%, comes from the esports segment, while 37% of their revenue is derived from gaming. The remaining 14% of their revenue comes from the Adtech segment. 

The shares of the Nazara Technologies opened at Rs 605, a 14% decline from the previous day’s closing price of Rs 706.50. Presently, they are trading at approximately Rs 660.85. It has given a return of a mere 20% in the last three months.

OnMobile Global’s shares began the day at Rs 76.44, exhibiting a 3.7% decrease from the previous day’s closing price of Rs 79.39. Currently trading at around Rs 75.93. The gaming business contributes about 28% of the company’s revenue. Over the past three months, the shares of OnMobile Global have generated a mere 10% return. 

Another player Delta Corp, operating in the casino gaming, hospitality, and online skill gaming segments, is also experiencing negative sentiment today. The company’s shares opened at Rs 222.15, marking a 9.98% decline from the previous day’s closing price of Rs 246.80 and currently trading approximately Rs 209.80 on BSE. Furthermore, Delta Corp has generated a return of 16.5% over the last three months. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.