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28% GST On Online Gaming: How Will It Impact the Indian iGaming Industry?

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At the recently concluded 50th GST Council Meeting held on 11 July 2023 in New Delhi under the chairpersonship of Union Finance Minister Smt. Nirmala Sitharaman, it was decided that online gaming would be taxed at 28% on the face value of the placed bets in India. 

However, adding more to the statement made, she justifies that the idea was not to hurt the industry. But it was to simplify the mechanism, surpass complexity and make the process transparent.

She also asked a question in front of the media, and said, “ We just want to ask the betting industry tycoons do you all really consider the industry that includes casinos and holds the potential to burn one’s pocket if not practiced safely, must be endowed with a greater encouragement than essential goods?”

28% GST On Online Gaming In India

What was the Rate Before The 50th GST Counseling Meeting? And What can be expected now?

Online gaming companies are now paying 18% GST on the Gross Gaming Revenue or the platform fees to the Govt. Of India. Besides, a winning TDS percentage of 30% gets deducted from the total winning amount. 

But once the 28% GST Deduction proposal will go live, the game will have to pay 28% GST on the deposited amount. He will have to pay the platform fee and bear another 30% TDS on net winning. 

Let’s understand this with an example, A player who placed a bet of ₹100. Pays ₹10 for platform fees, and GST of 18% which means another deduction of ₹18. So, after all this deduction, he gets ₹72 to play with. 

Now, after this decision, if the game owners keep the platform fee the same, he would pay ₹28 as a GST deduction and in the end, a player would get, ₹62 to play with in his wallet. 

It must not be a surprise to you all reading this as the decision made about 28% GST levy has not been greeted with enthusiasm. Let’s learn more about it in the next section

How Did The Investors And Game Owners Welcome This Decision?

Ever since the order has been passed in the 50th GST Counseling Meeting, as many as 30 investors involving some of the highly valued names that have Kalaari Capitals, Peak XV Partners, Orios Venture Partners, Alpha Wave Global, and more, have written to the Prime Minister’s Office requesting them to reconsider the decision.

The letter states that “ We as an investor, had a clear vision to make the country a net exporter of innovation in gaming and allied areas. We wanted to make India the gaming capital of the world. However, this decision will have the unintended consequence of equating the constitutionally protected legitimate online gaming industry with gambling, betting, the game of skills, and other game of chances.

Believe it or not but skill-based real-money gaming is India’s largest gaming sub-sector. Also, it supports a significant proportion of the game developer community and gives them a great employment opportunity for a better future across the country.

The gaming industry is rapidly growing at a good pace of around 50% per annum. This alone has attracted an investment of around $3 Bn globally across 400 new startups (some of these have turned unicorns too) that have emerged in the past couple of years. 

Concerned about the huge investment made, and the expected $4 – $6 Bn in the next 5 yrs, the letter said that this new proposal will adversely impact prospective investors as well. 

As far as other socio-economical and job-related issues are concerned, the proposal may impact the industry in an adverse manner resulting in the loss of over 50,000 high-skilled techies, game developers-designers, and even marketers. A further loss of livelihood opportunities for over 1.5 Mn Indian citizens, who are directly or indirectly related to this industry, may bear heavy losses as well.

Money invested in advertisements and all those games which are now sitting at the initial level of its development would get completely whipped off, leading to leaving the media and entertainment industry with a highly adverse impact. 

We ain’t saying this but according to some investors, this new policy might make the entire industry disappear.

List Of Investor Who has invested in Online Gaming in india

What To Expect: Revision Or Final?

Though the Internet and mobile association of India are opposing the new proposal, the Indian Govt. is in no mood to reconsider or revise its decision. 

“It will help to curb the unwanted gambling addiction”, said an official. But the game owners are in no position to welcome this new proposal. 

The last Monday, the Confederation of All India Trades(CAIT) in their written letter, said, “ Like torrent and other offshore web portals, that people use to fulfill their need, the 28% GST will work same in the gaming industry as people will start using illegal or restricted website to invest and play. All this will eventually make the internet less safe for digital users and anyway is an aberration to the efforts invested by the central government to promote and practice responsible gaming in the country”.

While talking to a media person, an official stated, “ We have received enormous requests but there is no plan for a review. The decision was taken after much thought and deliberation. So, any new changes or any kind of review can’t be expected any soon.”

Bottomline

The levy of 28% GST is an unwanted and undesired proposal made by the Indian GOVT and no game owners or their angel investors are in support of this. But on the other hand, Indian Government is clear on its intention that, this decision is made to restrict the players, especially youth, and thus the levy.

Lastly, All the information shared here is taken from multiple media websites and other trustworthy resources. So, if you have any questions or queries, feel free to reach out to us, our team would be happy to discuss and help with the best solutions available.

Also, to learn more about the gaming industry, you must check out our blog section. All the blogs shared there would be helpful resources to increase your knowledge.

 

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