28% GST on online gaming blow to $1-trillion digital economy target: Karnataka IT minister

IT-BT minister Priyank Kharge

Karnataka Information Technology and Bio Technology (IT & BT) minister Priyank Kharge on July 13 slammed the decision of the GST Council to impose a 28 percent Goods and Services Tax (GST) on online gaming.

Expressing his concerns, Kharge stated that the flat tax rate of 28 percent has significant negative implications, potentially hindering India's goal to become a USD 1 trillion digital economy by 2025.

"Although I personally oppose all forms of gambling, implementing a flat 28 percent GST on the gaming industry has significant negative implications. The tax applies uniformly, regardless of whether a game relies on skill or chance," said Kharge.

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He emphasised the need for a more thorough consideration of this decision, given its potential consequences for the digital economy.

Kharge highlighted the possible adverse effects on the Indian gaming startup ecosystem, which has attracted a substantial $2.5 billion in investments.

"The Indian gaming startup ecosystem may suffer from reduced prospects of foreign direct investment due to this taxation," he said.

Also Read: 28% GST levy will upend the economics of real-money gaming sector, says Nazara's Nitish Mittersain

Industry stakeholders echoed concerns about the GST Council's decision, expressing fears that the imposition of a 28 percent tax on the face value of transactions or entry fees for online real-money gaming could decimate the entire industry and result in significant job losses.

Responding to complaints on illegal loan apps, Kharge told Moneycontrol that the government had taken the matter seriously and had already initiated action against 42 such loan apps, confiscating their offices.

On July 11, a 22-year-old engineering student from Jalahalli in Bengaluru died by suicide, alleging harassment by private money lending apps.

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Kharge said the government is committed in cracking down on these illegal loan apps. "The government is extremely serious about addressing the menace of these illegal loan apps." he said.

The Karnataka Congress, in its election manifesto, had promised to formulate a policy to strictly regulate online loan apps within 100 days.

Kharge said there are complexities in formulating such a policy, noting that consultations with stakeholders were necessary, particularly given the financial nature of these apps and the associated registrations. He said that the state home minister would soon take up this matter.