PM Modi: In order to defend the online skill gaming industry, more than 120 CEOs/founders of online skill gaming businesses and game developers, along with all industry organisations, have written to the PMO and pertinent ministries. A 28 percent tax on online gambling at face value was issued by the GST Council on Tuesday, startling the sector and causing it great anguish. The sector currently adds 18% GST to GGR and platform fees. According to the letter, “a GST rise to 28% on GGR/Platform charge will result in a GST quantum increase of 55%. Even though such an increase may provide difficulties for the sector, it is supported because it will help with nation-building.
Imposing GST on Revenue Essential for Thriving Gaming Sector
However, this tax should be imposed on the platform fee/Gross Gaming Revenue that is received by the industry in order for the sector to thrive. This is comparable to other technology service platforms in that just their revenue is taken into account when determining whether to levy GST. With a $20 billion enterprise valuation, $2.5 billion in annual revenue, 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 attracted FDI of over $500 million, and between January 2021 and June 2022, FDI worth approximately $1.5 billion. There are already lakhs of direct and indirect jobs supported by the business, and over the next few years, these numbers will increase significantly. “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 unprecedented tax increase. 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,” stated the letter.
Gaming Sector’s Letter Highlights Negative Impact of Proposed GST Increase
The sector also made 8 key points in the letter, which emphasise the negative effects of such taxation, and asked the PMO for a workable and progressive GST framework as well as a rethink of the present recommendation. “Haters the PM’s Vision and the Digital India Initiative. A 400–500% increase in the GST burden will limit the industry’s potential for expansion and adversely affect many MSMEs and startups’ ability to survive. Impact on livelihoods and significant job losses. Impact on Consumer Affordability, growth of the black market, and various criminal activities. Offshore gambling websites will expose Indian gamblers to damaging offshore gambling websites that are not answerable to the Government of India, which would result in a significant revenue loss to the government. Restraint of Foreign Investment The decision by MeitY to include intermediaries for online gaming under its purview was well applauded and would have brought in a sizable amount of FDI. However, potential investors, both domestic and foreign, would be discouraged from recognising India’s online gaming industry as a viable investment destination if GST were to be implemented on the whole value. Additionally, this decision has an impact on the current investments, which total more than $2.5 billion.Loss of the chance to lead the global gaming industry and its effects on exports. Exchequer Long Term Net Revenue Loss,” it said.
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