Gaming Industry Leaders Urge Government to Reduce GST and Distinguish Skill Gaming from Gambling
A group of approximately 127 online gaming companies and organizations have penned an open letter to the government, pleading for the reversal of the 28 percent Goods and Services Tax (GST) imposed on the entire deposit amount. They also implore the government to distinguish skill gaming from betting and gambling, as this has caused considerable distress within the industry.
The letter, which was attended by Baazi Games, Dangal Games, Gameskraft Technologies, Nazara Technologies and WinZO Games Private Limited, among others, stated that this move could have devastating consequences (including business closures) for small and medium enterprises and startups that may not have access to capital. . to withstand such a steep tax increase.
“Furthermore, this decision will encourage illegal offshore gambling operators, drive Indian users to them and ultimately lead to neither optimal tax collection nor growth of the legal industry,” the letter read.
With an enterprise value of $20 billion, revenue of $2.5 billion, and annual revenue of $1 billion, online skill gaming will grow at 30 percent CAGR and reach $5 billion in revenue by 2025.
The total number of Indian online gamers increased from 360 million in 2020 to over 420 million in 2023.
India’s gaming industry attracted around $500 million in FDI between 2014 and 2020 and more than $1.5 billion between January 2021 and June 2022.
“The industry currently supports millions of direct and indirect jobs, and these numbers will grow significantly in the next few years,” said
letter.
The Goods and Services Tax (GST) Council announced this week that bets placed on online gambling, horse racing and casinos will now be taxed at 28% of the full value.
According to Finance Minister Nirmala Sitharaman, the decision was not meant to kill the industry but was done on the basis of a “moral issue” that it cannot be taxed as much as essential commodities.
According to industry stakeholders, the GST Council’s recommendation to levy GST on the entire deposit is a significant threat to the industry’s success, gaming innovation and continuity.
The letter mentioned eight key points that highlight the negative effects of such taxation, such as hampering the Digital India initiative; impacts on startups and SMEs; impact on jobs and livelihoods; impact on consumer affordability; offshore gambling sites are unintended beneficiaries; stifling foreign investment and global competitiveness; Losing the opportunity to become a global leader in the gaming industry and affecting exports and long-term net revenue loss for the government.
“For the industry to survive, this tax should be levied on the platform fee/gross gaming revenue earned by the industry. This is similar to any other technology service platform where only the revenue earned by the platforms is considered for GST collection.
letter.
