127 gaming industry leaders to the government: Reverse 28% GST and separate skill gaming from gambling
The government has been urged in an open letter by over 127 online gaming firms and organizations to reverse the 28% GST on the whole deposit amount and separate skill gaming from betting and gambling, both of which have caused serious problems for the sector.
Participants in the letter, which included Baazi Games, Dangal Games, Gameskraft Technologies, Nazara Technologies, and WinZO Games Private Limited, claimed that the decision could have disastrous effects on MSMEs and startups that might not have the capital reserves to withstand such a significant tax increase, including the closure of businesses.
Further, the letter said, “This decision will encourage illegal offshore gambling operators, direct Indian users to them, and ultimately not result in optimal tax collection nor the expansion of the legitimate industry.”
With a $20 billion business value, $2.5 billion in yearly sales, and $1 billion in taxes, online skill gaming is expected to increase by 30% CAGR to $5 billion in revenue by 2025.
Over 420 million Indians played online games in 2023, up from 360 million in 2020.
Between 2014 and 2020, the gaming sector in India received FDI of over $500 million, and between January 2021 and June 2022, FDI worth approximately $1.5 billion.
The letter said that “the industry currently supports lakhs of direct and indirect jobs, and these numbers will grow significantly in the coming years.”
The GST Council announced this week that wagers made in online gambling, horse racing, and casinos would henceforth be subject to a 28% tax at full value.
The decision was reached after addressing the “moral question” of whether the sector could be taxed equally with necessities, according to Finance Minister Nirmala Sitharaman.
The success of the sector, as well as gaming innovation and continuity, are seriously threatened, according to industry stakeholders, by the GST council’s decision to impose GST on the whole deposit.
The letter outlined eight key points that highlight the negative effects of such taxes, including how they will hinder the Digital India Initiative, have an impact on startups and MSMEs, affect jobs and livelihoods, have an impact on consumer affordability, benefit unintended offshore gambling sites, stifle foreign investment and global competitiveness, hinder opportunities to lead the gaming industry globally, have an impact on exports, and result in long-term net revenue loss for the exchequer.
“This tax should be imposed on the platform fee/gross gaming income generated by the business in order for the sector to thrive. According to the letter, “This is comparable to any other technological service platform where only the money that platforms produce is considered for the purpose of levying GST.
