Last Updated: July 12, 2023, 18:29 IST
The decision to impose 28 percent GST on online gaming, horse racing and more activities has come as a rude shock to the industry executives, who are clearly not sure how the sector is hoping to flourish despite such limitations.
“The GST Council’s decision to levy a 28% GST on online games without distinguishing between games of skill and chance poses a severe threat to the growth and sustainability of the online gaming industry in India,” as said by the Management of Kick Games Studios Pvt Ltd.
Other entities in the sector like Games 24×7 have also shared their concern about the future of the business and the gaming sector going in the wrong direction. “We are deeply distressed with the GST Council’s decision to implement 28% GST on the Contest Entry Amount (CEA) as opposed to Gross Gaming Revenue, which is the international standard for the sector,” said Bhavin Pandya, Co-founder and Co-CEO, Games24x7.
In addition to the fear of losing revenue and the definite loss of employment leading to that, these companies are also clear that policies like these are only beneficial for those not involved in the system.
“Imposing GST on CEA will render the legitimate online gaming industry unviable, effectively driving consumers towards offshore and illegal platforms that pay no taxes, resulting in loss of taxes and outflow of foreign exchange. Further, this will also lead to loss of employment for thousands working in this sector,” Pandya adds.
With over 77 percent of India’s gaming sector revenues accounted for by the online segment, it is evident the government wants these companies to pay their share but a higher GST is not only detrimental to the operations but also pushes consumers from involving in such activities.
“Not only will this burden hinder the growth of this nascent industry, its application will compress new innovation and opportunities. This decision does not take into account the pleas of the industry, global precedents, and even counters the favorable regulatory environment being built up for online gaming in recent months,” Siddharth Sharma, SVP- Business Strategy, Head Digital Works (A23) said.
Clearly, the new GST levied on the sector is not proving to be a popular call, and most of these executives are seeking a quick redressal of the situation with all stakeholders. “We urge the government to reconsider this decision and work with the industry stakeholders to find a more suitable taxation model that supports sustainable growth for the industry,” Pandya explained.