The TDS or tax deducted at source on online gaming applications will now be effective from 1 April, 2023 as against an earlier provision of 1 July, 2023.
This comes as the online gaming industry stakeholders had approached the Central Board of Direct Taxes (CBDT) and the Prime Minister's Office (PMO) to oppose changes in TDS and Goods and Service Tax (GST) on the sector.
On 23 February, three online gaming industry bodies, including E-Gaming Federation (EGF), All India Gaming Federation (AIGF) and Federation of Indian Fantasy Sports (FIFS), wrote to the CBDT to reconsider the changes in TDS regime, which take effect on 1 April.
This follows a 9 February letter to the PMO requesting not to club online gaming with gambling, horse racing and casinos. The latter sectors are imposed with the highest tier of GST at 28 per cent, often referred to as 'sin tax'.
At present, online gaming firms are required to charge a 30 percent TDS on any winnings withdrawn by users in excess of ₹10,000 in each transaction. While the ₹10,000 threshold will remain from 1 April, it will apply on a user's annual earnings.
"Online gaming has the potential to emerge as the next big new age export economy for India, but imposing 28 per cent GST will prematurely stifle the sector. There are many early-stage companies in the sector. However, increasing tax rates for the sector will take away companies' ability to survive. It also affects creators, whose earnings will be stifled," Saumya Singh Rathore, co-founder of Delhi-based gaming firm Winzo Games said.
The 9 February letter refers to a long-standing debate on the appropriate rate of taxation on online gaming. While a group of ministers (GoM) chaired by Meghalaya chief minister Conrad Sangma has already submitted its report to the GST Council, the matter was not taken up for discussion in the Council's 49th and latest meeting held on 20 February.
Online gaming companies are presently liable to pay 18 percent GST on their gross revenue.