E-gaming cos look to absorb GST through cashbacks, bonuses
New Delhi, October 4, 2023
Even as the industry deals with the fallout of the new goods and service tax (GST), online gaming companies have come up with a new idea to avoid losing customers – by absorbing the GST deduction and compensating users for it for at least the next two to three years.
The move comes after amended legal provisions and rules for online gaming, horse racing and casinos kicked in from October 1, bringing into effect the 28 per cent tax at face value at entry level under the GST regime.
Fearing that passing on the GST deduction on deposits to their wallets could result in a loss of customers, many online gaming companies have decided to foot the bill for “as long as possible”, a senior gaming company executive told The Indian Express.
“The bigger ones may be able to absorb the GST costs for around three years, some of the smaller ones may be able to do so for two years. But many of the upcoming companies will not be able to do this and as a result may shut down,” another senior executive said, requesting anonymity.
Dream11, the most popular fantasy app, has started offering users ‘discount points’ to offset the cost of the GST deduction. If a user adds Rs 100 to their account, they will receive Rs 78.12 as the deposit amount (after accounting for the 28 per cent GST deduction of Rs 21.88), but the exact deduction will be offered to the user by Dream11 as part of discount points. In effect, this means that if Dream11 was not absorbing the GST hit, a user’s balance on the deposit of Rs 100 would have shown Rs 78.12. So, basically, Dream11 is paying the remainder Rs 21.88 to keep the total balance at Rs 100 so that the user does not have to pay additionally to take the balance to that amount.
However, in Dream11’s case, 22 per cent of the amount used to join contests will be deducted from a user’s discount points balance after all other available discounts are applied at the time of joining contests. Discount Points will be valid for 90 days from the date of credit.
Mobile Premier League (MPL), which also offers a fantasy platform along with other games on its app is also giving a cashback to users which is exactly the amount of the GST deduction. This paper added Rs 50 to an MPL wallet, and Rs 10.93 was deducted from it as GST charges, but MPL credited the wallet with Rs 10.93 to keep the original deposit of Rs 50 intact.WinZO, which aggregates different online games such as Poker, Ludo and Rummy on a single platform, is offering users a “bonus” ranging from Rs 10-Rs 50 depending on the amount a user deposits in their account. For every Rs 100 deposited, WinZO is offering a bonus of Rs 50.
As the amended GST rules came into force, concerns about compliance and the applicability of the amended legal provisions have been raised as some states are still in the process of clearing the amendments for their respective State GST (SGST) laws.
On Saturday, in a letter written by All India Gaming Federation to the Ministry of Finance, a copy of which has been seen by this paper, online gaming companies have asked the government to reconsider the amendments, citing the fact that around 15 states are yet to make changes to their respective GST statutes.
[The Indian Express]
