The gaming industry is grappling with the severe impact of GST, hitting its top revenue generator, real money gaming, the hardest. As these primary income drivers brace for the impact, questions arise about the fate of not just companies but also players.
“The GST council’s decision to levy a 28 percent GST on the face value of bets placed will have an adverse impact on the online gaming industry and will drive the industry to the ground,” said Shivanandan Pare, CEO, and Executive Director of Deltatech Gaming Ltd.
In FY 22, RMG revenue constituted 57 percent of the market. The growth in the space was fueled by a rapidly increasing gamer base, higher conversion to paid users, and increasing sophistication of the Indian gamer. As per Lumikai’s latest report, the gaming industry clocked $2.6 billion in revenues in FY22 and was expected to cross $8.6 billion by FY2.
Given the 28 percent tax slab, reaching that target sure looks difficult.
One primary reason behind the failure could be the dropping out of players.
“As a professional esports athlete, I am deeply concerned about the recent hike in GST rates, which could have a significant impact on the earnings of athletes in the industry. Many esports athletes come from humble backgrounds and have turned to gaming as a way to support themselves and their families. The increased GST rate could affect our ability to earn a living from gaming and could discourage many from pursuing a career in esports,” said Subham Ninja Sahoo, a BGMI e-athlete.
“It is imperative that the government takes into account the impact of the GST rate on the athletes and the industry as a whole, as it has the potential to stifle the growth of esports in the country,” Sahoo added.
As per the E-Gaming Federation that has members like Games 24×7, Junglee Games, Head Digital Works, and others, the new tax slab will lead to a nearly 1000 percent increase in taxation and prove catastrophic for the industry.
A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators, in addition to the loss of employment opportunities and the huge impact on marquee investors who are heavily invested in this sunrise sector, said the secretary of the federation.
KR Rohith, CEO at the gaming and entertainment company Gods Reign, said that the government should consider the long-term implications of the GST rate on the industry and explore alternative policies that can support its growth.
“For example, the government could consider implementing a tiered GST rate based on the revenue of the gaming companies and differentiate the GST rate between skill-based and real money gaming. This could encourage investment in the industry and support the growth of smaller gaming companies while still generating revenue for the government,” Rohith said.
However as per reports, the finance ministry is unlikely to consider a review of the GST Council’s decision.
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