Finance Ministry, RMG Operators to Discuss GST, Money Laundering in Online Gaming

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The Finance Ministry has scheduled a meeting with real-money gaming (RMG) operators to address money laundering in online gaming. According to a source article by Storyboard18, this meeting will also discuss GST challenges and offshore gambling companies operating in India.

The Ernst & Young and US-India Strategic Partnership Forum (USISPF) report highlighted that the online gaming sector expected to generate 250,000 jobs by 2025. However, the new GST regime has reduced this estimate to 30,000 jobs, with 83.3% of companies facing employment challenges. Foreign Direct Investment (FDI) in the sector has also slowed, contrasting with $1.7 billion received in 2021.

Officials from the Financial Action Task Force (FATF) will attend the meeting, outlining international standards for preventing money laundering and terrorist financing. The FATF aims to gather industry feedback on controlling financial crimes in online gaming.

An RMG operator told Storyboard18, “The ministry seeks strategies to combat money laundering and crack down on offshore gambling platforms operating illegally in India. These unregulated platforms harm legitimate businesses and pose financial crime risks.”

The recent GoM meeting chaired by Nirmala Sitharaman also discussed curbing money laundering through online gaming, focusing on enhanced financial tracking and stringent checks for operators.

A source mentioned that the 40-minute open discussion session will cover GST issues and offshore gambling infiltration. In July 2023, the GST Council imposed a 28% tax on online gaming, aligning it with casinos and horse racing. Finance Minister Nirmala Sitharaman reported a 412% increase in online gaming revenue, reaching ₹6,909 crore in six months, while casino revenues rose by 30%.

The Ernst & Young and USISPF report revealed that the 28% GST forced 20% of early-stage startups to shut down, 40% to freeze hiring, and 20% to lay off employees.

Approximately 30 petitions have been filed by RMG companies challenging retrospective GST demands exceeding ₹1.5 trillion. The Supreme Court is handling 27 of these petitions, initially filed by Head Digital, Play Games24x7, and Baazi Games, along with a challenge from the GST department against a Karnataka High Court verdict.

Additionally, the Finance Ministry will explore regulatory measures, including curbing the operations of offshore platforms that evade Indian taxes and regulations, as highlighted by industry stakeholders.

Nirmala Sitharaman emphasized the importance of stringent regulations in sectors like online gaming to prevent financial crimes, aligning with the upcoming discussions with RMG operators.

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