More than 100 Indian entrepreneurs, CEOs, and industry bodies involved in real-money gaming have written to the Indian government, seeking reconsideration of the decision to impose 28% GST (goods and services tax) on “online skill gaming”.
The letter, signed by companies like Nazara Technologies, Baazi Games, and Winzo Games and industry body All India Gaming Federation, says that the move is going to hurt the industry, and that clubbing “online skill gaming, a constitutionally protected activity, with betting and gambling, has left the industry in significant distress.”
“The proposal to charge GST on the full Deposit Value will reverse the growth trajectory of the industry. This would potentially have devastating implications (including shut down of businesses) for MSMEs and startups that may not have the capital reserves to withstand such a sharp tax increase,” reads the letter, seen by Entrackr.
“Further, this decision will encourage illegal offshore gambling operators, drive Indian users to them and ultimately lead to neither optimal tax collection nor the growth of the legitimate industry.”
It also highlights a few consequences of the move. The letter says the move will impact the jobs and livelihoods of people in the industry. It claims the industry currently employs around 1 lakh persons across engineering, marketing, design, and research categories. There is also another layer of content creators and game streamers, who hail from smaller cities and towns, who could be affected.
It also cautions that the move will encourage people to embrace black market operators. “This will result in substantial tax loss to the government and will expose Indian gamers to harmful offshore gambling websites, which are not accountable to the Government of India,” it reads.
Earlier this week, the 50th Goods and Services Tax (GST) Council meeting decided that a 28% GST will be levied on the full face value of online gaming. The tax regime is likely to come into effect once the finance ministry brings the amendment to the GST law.
“Online gaming, horse racing, and casinos will be taxed at 28% (all three activities) and they will be taxed on full face value,” Union Finance Minister Sitharaman said in a media address following the meeting.
The announcement since then has met with a sharp reaction from the companies operating in real-money games.
The Federation of Indian Fantasy Sports (FIFS), a self-governing body that has members like Dream11, Fantasy Akhada, and Guru11, expressed disappointment over the decision. It also said that the move will cause “irreversible damage” to the gaming industry. Meanwhile, the leading player in real-money gaming space Dream11 has reportedly forecasted an 80% drop in EBITDA after the government move.
