Government Tax Panel Said to Be Unlikely to Reach Consensus on Taxing Online Gaming in December

A panel of state finance ministers has yet to submit its report on taxation of the booming online gaming sector that is crucial to a final decision on how the levies should be imposed, a senior government official said on Monday.

The panel has for weeks been deliberating how it should tax online gaming companies — and whether federal tax should be imposed on only the profits of firms or on the value of the entire pool of money collected from participants.

The panel is unlikely to reach a consensus this month, the official told reporters in New Delhi.

Real-money online games have become hugely popular in the country, prompting foreign investors like Tiger Global and Sequoia Capital to back local gaming startups Dream11 and Mobile Premier League, popular for their fantasy cricket games.

Any decision on this in the upcoming meeting of the goods and services tax (GST) council on December 17 will be contingent on the availability of the report which has yet to be finalised, the official said.

The government is also separately working on federal regulations for the gaming sector that research firm Redseeer estimates will be worth $7 billion (roughly Rs. 57,000 crore) by 2026, dominated by real-money games.

Those planned regulations will apply to all real-money games after the prime minister's office overruled a proposal to only regulate games of skill and leave out games of chance, Reuters reported on Sunday.

During the December 17 meeting of the GST council, the panel of federal and state finance chiefs will also discuss decriminalising the tax laws by way of raising the threshold for prosecution, the official added.

A separate government panel tasked with the rationalisation of GST rates is also discussing the 18 percent tax levied on health insurance, amid calls seeking a lower rate, said the official.

© Thomson Reuters 2022