Online Gaming Companies Consider Moving to Court Over Government’s 28% GST Levy
Industry leaders are expressing concerns about the potential consequences of this move, emphasizing the likelihood of higher expenses for gamers, decreased investment, a rise in illegal gambling activities, job losses, diminished innovation, increased piracy, and harm to the industry’s reputation.
When GST is passed on to gamers in the form of higher prices for games and in-game products, it makes gaming cheaper and may lead some people to pirate games instead of paying.
As such a decision can make legal online gambling more expensive, people may also switch to illegal gambling platforms, which are often easier to use and also not subject to the same restrictions.
Correspondingly, high GST makes it difficult for gaming companies to acquire capital and invest in new games and technologies. This can affect the pace of the industry and weaken its competitiveness in the global market.
Additionally, the gaming industry is a major employer in India and a higher GST could lead to job losses as companies may have to cut costs to cover the higher taxes.
Additionally, a high GST can make it harder for companies to innovate and develop new games, as they have to spend more money on research and development and may be less likely to take risks on new ideas.
Ultimately, the industry argues that a high GST could damage the reputation of the online gaming industry in India as it could be seen as a sign that the government is not supporting the setup or its growth.
The following possible transfers
The future of online gaming companies in India is currently uncertain. The government has not announced any plans to change the 28 percent GST, so businesses will have to adjust to the new tax regime.
Online gaming companies can now take some steps to mitigate the effects. Passing the cost on to players is the most likely scenario at the moment, as companies have to cover the higher taxes somehow. However, this can lead to a decrease in the number of players and a decrease in the income of companies.
Second, companies may try to lower their costs to compensate for higher taxes. This may mean cutting costs in marketing, research and development or personnel. But this can also lead to a decrease in the quality of games or services provided.
However, online gaming companies may focus on specific market segments, such as casual gamers or mobile gamers. This could help them lower their costs and target a market that is less price sensitive. They can also expand into international markets where GST is lower, which could help them offset higher taxes in India.
Individually, they may offer more value-added services such as in-game coaching or live streaming to help players improve their skills and experience, or partner with other companies such as telecom operators or banks to offer discounts or promotions. They can also educate players about GST and how it will affect them, which can help reduce player backlash.
There is another way the industry can choose, with some companies considering challenging the decision in court. The online gaming industry, which is a skill-based activity and not gambling, may argue that this decision violates the right to freedom of trade.
The industry may argue that the 28% GST violates this right because it imposes an unreasonable burden on it and makes it difficult for businesses to operate and compete in the market.
However, for now, industry leaders want to engage in dialogue with regulators so they can bring their concerns to the table and answer questions to find a middle ground.
