GST Ruling To Cause Financial Losses For Online Gaming Industry: Industry Leaders
The industry executives have been taken aback by the decision to impose a 28 percent GST on online gaming, horse racing, and other activities. They are uncertain about how the sector can thrive under these restrictions.
“The GST Council’s decision to levy 28% GST on online games without differentiating between skill and casual games poses a serious threat to the growth and sustainability of the Indian online gaming industry,” said the management of Kick Games Studios Pvt. Ltd.
Other players in the industry, such as Games 24×7, have also shared their concerns about the future of business and the gaming industry going in the wrong direction. “We are deeply concerned about the GST Council’s decision to introduce 28% GST on the Competition Entry Amount (CEA) as compared to the gross gaming revenue, which is the international industry standard,” said Bhavin Pandya, Co-Founder and CEO, Games24x7.
Apart from the fear of loss of income and the resulting clear loss of employment, it is also clear to these companies that such policies only benefit those who are not part of the system.
“Imposing GST on CEA makes the legal online gaming industry viable, effectively driving consumers to offshore and illegal platforms that do not pay taxes, resulting in loss of tax and foreign exchange. Moreover, this also leads to loss of thousands of jobs in this industry,” Pandya more.
With more than 77% of India’s gaming industry revenue coming from the online segment, it is clear that the government wants these companies to pay their share, but a higher GST is not only detrimental to operations but also forces consumers to engage in such activities.
“This burden not only hinders the growth of this nascent industry, but its application squeezes new innovation and opportunity. This decision ignores industry pleas, global precedents and even defies the favorable regulatory environment for online gaming in recent months,” said Siddharth Sharma, Head of Business Strategy, Digital Works (A23).
It is clear that the new GST levied on the industry has not proved to be a popular call and most of these leaders are looking for a quick fix to the situation with all stakeholders. “We urge the government to reconsider this decision and work with industry stakeholders to find a more appropriate taxation model that supports the sustainable growth of the industry,” Pandya explained.
