Esports Businesses Clarify: 28% GST Applies Only To Real-Money Gaming, Not Esports

The recent announcement by Finance Minister Nirmala Sitharaman regarding the taxation of online games has stirred up a discussion in the world of online gambling . With a 28% goods and service tax (GST) now in play, many enthusiasts and operators are closely examining its potential impact on the industry.

The immediate question that arises is whether this new tax will solely apply to real money gaming (RMG) or extend its reach to cover video games and esports as well. The lack of clarity surrounding this issue has led to some confusion and concern among players and stakeholders.

In fact, the amendments made to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules in April 2021, provide a complete framework for online gaming with the right definition of terms.

Part of what contributes to the debate is which games are considered games of skill and luck? Though advocates argue that RMG requires both skill and luck, the same can’t be said about esports. Nonetheless, esports continues to grow with EY reports projecting that the compound annual growth rate (CAGR) will be 46% and prize pools and revenues will increase by 2025.

Esports should also be exempted from the tax as most of their revenue comes from brand sponsorship and media rights, and not imposing fees on players.