The GST Council is reportedly planning to increase the GST on GRR to 28% - the highest tax slab.

In an open letter, IAMAI asked for a status quo on GST on online games. The industry body pointed out that 28% GST is applied to products that are deemed "sinful consumption." On the other hand, online gaming has been recognised as a game of skill and a legitimate trade by the Supreme Court of India.

IAMAI reiterated that equating skill games with gambling and betting by increasing the GST to the highest slab is against the letter and spirit of the Supreme Court judgment.

The industry body also warned that putting online gaming in the highest GST slab will increase the incidence of taxation to about 55%, which is unfair to the gaming industry. It would increase the cost of participating in games for the majority of end-users, which will eventually impact the GST collection from the sector.

According to IAMAI, online gaming companies have paid a cumulative GST of ₹ 6,000 crore in the last four years and are expected to pay ₹ 16,000 crore between 2022-25. This has been possible because online gaming platforms have a transparent and measurable online payment mechanism, it added.

Some believe that the government also plans to levy a 28% GST on CEF. IAMAI warned that this will lead to an 1100% increase in tax and will break the industry. IAMAI said that globally, in most jurisdictions including the US, the UK, and the European Union, tax is charged on GGR.

The industry body also warned that an increase in GST will prompt many offline service providers to go underground and lead to revenue leakage.