GST on online games
The 50th GST Council meeting decided to impose a 28% tax on online gaming, including casinos and horse racing.
Concerns raised by online gaming investors
Top investors in India’s gaming sector have written to PM Narendra Modi for a review of the GST Council’s recent decision to levy 28% tax on the full value of bets placed by users.
Terming it the world’s most onerous regime that could wipe out $2.5 billion of investments and more than 50,000 high-skilled jobs.
Investments to the tune of at least $4 billion, planned over the next 3-4 years in the industry which had almost $3 billion in revenue in 2022 in India, could also be hit, as per the communique to the PM.
Increased tax would “substantially and meaningfully erode investor confidence in the backing of this or any other sunrise sector in the India tech ecosystem.”
Skill-based, real-money gaming is India’s largest gaming sub-sector and also supports a significant proportion of the game-developer community across the country they are pivotal to the PM’s vision of making India a gaming superpower.
There are about 400 Indian start-ups funded by marquee global investors in real money gaming.
The investors emphasised they backed a robust, certain and fair tax regime that aligned with government’s socio-economic development goals.
In 2000, the U.K. moved to a model of 15% tax on the operator’s gaming revenue, creating one of the largest and most sustainable gaming markets.
In France, the Senate has noted that a tax model on full value does not work and is reverting to a model of taxation based on operator’s gaming revenue.
However, the change in methodology to apply GST rates on ‘full value’ will result in wholesale destruction of the sector.
Many MSMEs and start-ups which may no longer be able to sustain business operations and will shut down with immediate effect.
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