Online skill gaming companies have written to the Ministry of Finance and GST Council members seeking a distinction in tax treatment between fantasy sports. The letter written by over 120 companies said that the consumption patterns of online skill gaming differ from fantasy sports and lotteries.

The companies said that online skill games have a different business model and consumption pattern when compared with large payout tournaments such as fantasy games.

“In online skill gaming, players engage in live matches based on their skills in the games such as playing against each other in quick succession. However, in Fantasy Sports, it differs from a large guaranteed prize pool that users participate in by way of teams,” said the companies in the letter.

The gaming companies with a combined user base of over 400 million users, urged not to be clubbed with games of chance. The companies highlighted that GST on deposits would result in the closure of all continuous game formats that have very weak price elasticity as nearly 75% of the deposit money is withdrawn back by the user as winnings.

They pointed out that users will move to offshore platforms as they will not have any winnings left due to high taxation. This will lead to the shutdown of more than 120 online skill gaming companies, the letter stated.

The companies said that in online skill games, users don’t play live against each other, but rather in a tournament model where even if platforms are asked to pay GST of 28% on full face value, the fundamental proposition will not change.

“The proposed 28% GST rate on the full value or deposit poses a severe threat to the online skill gaming industry’s survival, particularly to startups currently in the research and IP generation phase,” the letter stated.

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