28 pc GST is for sinful consumption, equating games of skill with gambling against SC judgment: IAMAI

New Delhi: The highest GST rate of 28 per cent is meant for things that are considered "sinful consumption", and equating games of skill with gambling, betting and wagering will be against the spirit of Supreme Court judgement, industry body IAMAI said on Monday.

At present, the current rate of GST on this sector of online skill gaming industry is 18 per cent on the Gross Gaming Revenue (GGR) and 0 per cent on Contest Entry Fee (CEF).

GST council has been mulling to increase the tax on online gaming to 28 per cent.

The Internet and Mobile Association of India (IAMAI) has appealed to the government to maintain the status quo on the online games of skill industry at 18 per cent as imposition of a 28 per cent tax on gross gaming revenue will lead to increase of tax incidence to 55 per cent.

"In India, 28 per cent GST is imposed on what is considered "sinful consumption. However, the Supreme Court of India...has clearly ruled that games of skills are legitimate trades and, are therefore, protected under Articles - 19(1)(g) and 14 of the Constitution. It would be against the letter and spirit of the Supreme Court's judgement to equate games of skill with games of chance -- gambling, betting or wagering," IAMAI said in the statement.

The industry body said that online skill games also provide the most transparent mechanism for accounting GST and the nature of transactions being completely digital ensures there is almost zero leakage in revenue.

Online games have paid a cumulative Rs 6,000 crore GST in the last four years and are likely to pay Rs 16,000 crore between 2022-2025, it said.

"In addition, unfortunately if 28 per cent is imposed on the CEF - the incidence of GST shoots up nearly 10 times. Thus, it is very likely that the industry and GST revenue thereof will cease to exist," the statement said.

According to the association, the impact of any changes in the current incidence of GST would mean that many of the offline service providers will go underground leading to further revenue leakages on one hand, and on the other, for the online games of skill it would tantamount to killing the proverbial goose that lays golden eggs.