Online Gaming Firms, Including Nazara and MPL, Call for Review of 28% GST in Joint Letter

• ByStartupStory     |    July 15, 2023

In a joint effort, a group of 127 online gaming players, including industry federations, has appealed to the government to review the recommendation of the GST Council to impose a 28% tax on the total amount of money placed on online gaming platforms. The players argue that this decision can have severe consequences, including business shutdowns for MSMEs and startups. They expressed their concerns through a letter addressed to the finance minister and the prime minister, stating that the recommendation has caused significant distress within the industry.

“The recent recommendation by the GST Council to club online skill gaming, a constitutionally protected activity, with betting and gambling, has left the industry in significant distress,” the letter stated. It further emphasized that charging GST on the full deposit value would hinder the growth trajectory of the industry. The representatives of the online gaming firms highlighted the potential rise of illegal offshore gambling operators, as Indian users may be driven towards them due to the increased tax burden. They also expressed doubts about optimal tax collection and the growth of the legitimate industry.

The letter included notable names such as Nazara Technologies, Third Unicorn (CrickPe), Winzo, Baazi Games, Dangal Games, Deltatech Gaming (Adda 52), Gamepe Technologies (Tamasha Games), Gameskraft Technologies, MyTeam11 Fantasy Sports (MyTeam11), and industry groups including All India Gaming Federation, E-Gaming Federation, Federation of Indian Fantasy Sports, and All India Game Developer’s Forum.

The Ministry of Finance recently announced the decision to impose a 28% GST on online gaming, horse trading, and casinos, which has sparked strong reactions from industry players. The tax will be levied on the full value, irrespective of whether the games are based on skill or chance. The online gaming companies presented eight core points in their letter, highlighting the impact on customer affordability, job loss, and hindrance to foreign investment and global competitiveness.

The industry employs approximately 1 lakh people in various roles, such as engineering, marketing, design, and research, and supports numerous content creators and game streamers, especially from Tier II to V cities. The companies emphasized the potential loss of more than 5 lakh new jobs over the next five years if negative impacts occur within the industry. They also warned that the proposed tax increase could drive users towards black market operators due to the increased cost of the games, coupled with the existing 30% income tax on winnings.

The online gaming firms have requested the ministry to engage in detailed discussions and promptly submit any additional information regarding this matter. Currently, the industry pays 18% GST on the gross gaming revenue/platform fee, and they propose levying tax only on the revenue earned by the platforms, similar to other technology service platforms. They hope for a viable and progressive GST regime and urge the reconsideration of the current recommendation to safeguard India’s nascent and high-growth potential online skill gaming industry.

“We sincerely hope that the above request is considered positively in the interest of protecting India’s nascent and high-growth potential online skill gaming industry,” concluded the letter.

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