28% Tax on Real Money Online Gaming Will Erode $2.5B of Investment: Investors Appeal to PM for Intervention
- ByStartupStory | July 22, 2023
A group of 30 Indian and foreign investors, including prominent names like Peak XV Capital, Tiger Global, DST Global, Bennett, Coleman & Company Limited, Alpha Wave Global, Chrys Capital, Lumikai, and others, have jointly written a letter to Prime Minister Narendra Modi expressing their concerns over the GST Council’s recent decision to impose a 28% tax on the real money online gaming industry. In the letter dated July 21, 2023, the investors urged the Prime Minister to intervene in the matter, highlighting the potential detrimental impact on the gaming sector.
According to the investors, the GST Council’s decision could lead to a significant impairment of the $2.5 billion invested in the segment, and it may also hinder prospective investments amounting to around $4 billion in the next 3-4 years. The current GST proposal, if implemented, will create one of the most burdensome tax regimes for the gaming sector globally, posing a risk of substantial write-offs of capital invested in this industry.
“The decision of the GST Council has caused shock and dismay among investors, eroding their confidence in supporting the growth of this sunrise sector in the Indian tech ecosystem,” the letter stated. The investors emphasized that the gaming sector’s growth in India would be adversely affected by the proposed GST rate, which may lead to unviable business models and hinder future investments.
The investors also highlighted the challenges posed by the tax structure, particularly the taxation of redeployed player winnings. They pointed out that if the “full value of bets” is considered, with GST levied on every contest played and fully taxed winnings, the GST burden could increase by a staggering 1,100%. This situation would lead to a scenario where over 50-70% of every rupee would go towards GST, making the online real money skill gaming business model nonviable.
To ensure the survival and contribution of Indian online gaming operators to the nation’s economy, the investors suggested levying 28% GST on the Gross Gaming Revenue (GGR) or Platform fees instead. This approach would result in a more manageable 55% increase in GST quantum and provide a viable path for the gaming sector’s growth in India.
In conclusion, the investors earnestly appealed to Prime Minister Narendra Modi to intervene in this matter and reconsider the GST Council’s decision. They believe that a more balanced tax structure will safeguard the interests of investors, promote growth in the gaming industry, and contribute positively to India’s economy.
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