17.07.2023: Online gaming companies, associations write to Centre to reassess 28% GST: Report

Over 130 online gaming companies and industry, associations have approached the Centre urging it reconsider the 28 per cent GST on the full face value for online gaming. The companies have signed an open letter and sent it to the Centre urging for a “viable and progressive GST regime”, a report said on Saturday.

The companies have said that the proposal to charge 28 per cent GST on the full deposit value will halt the growth of the booming industry, the Economics Times reported.

“The proposal to charge GST on the full deposit value will reverse the growth trajectory of the industry. This would potentially have devastating implications (including shut down of businesses) for MSMEs and startups that may not have the capital reserves to withstand such a sharp tax increase,” the letter to the government stated.

The letter was signed by companies, including Nazara Technologies, Mobile Premier League (MPL) and its game development unit Mayhem Studios, Gameskraft Technologies, and WinZO Games.

Besides gaming industry bodies, including the All India Gaming Federation (AIGF), E-Gaming Federation (EGF), Federation of Indian Fantasy Sports (FIFS) and All India Game Developer’s Forum (AIGDF), have also signed the letter.

AIGF represents companies, such as MPL, Zupee, and Paytm First Games, whereas EGF represents companies including Games 24×7 and Junglee Games. FIFS is backed by platforms, such as Dream11, and Fantasy Akhada.

On July 11, the GST Council imposed a 28 per cent tax on online gaming, horse racing and casinos. The effective date for the 28 per cent GST levy on online gaming will be announced after amendments to GST law, said Finance Minister Nirmala Sitharaman after the 50th GST Council Meeting.

Sitharaman said the decision to levy 28 per cent GST on online gaming, casinos, and horse racing was not aimed at killing the industry but was made considering the “moral question” that it cannot be taxed at par with essential commodities.

This means that According to the GST Coucil, a gamer will have to pay Rs 28 for every Rs 100 spent in an online game. The game could be based on skill, or luck.

The companies said that the 28 per cent GST on full value would “debilitate potential investors”, both domestic and foreign, from considering the online gaming sector as a viable investment destination.

“It may be noted that the impact will not only be on attracting fresh capital in gaming but would have a far wider impact on the Indian startup ecosystem as a whole, as the majority of these financial institutions invest across sectors and a favourable regulatory landscape is one of the single most important drivers for FDI. In addition, the current $2.5 billion plus in investments is at stake basis this decision,” the letter said.

The companies unanimously said that the online skill gaming sector in India currently has a $20 billion enterprise valuation, and generates $2.5 billion in annual revenue.

The industry is expected to grow by 30 per cent compound annual growth rate (CAGR) to reach $5 billion in revenue by 2025, it added.

Earlier this week, Revenue Secretary Sanjay Malhotra said the government's decision to impose a 28 per cent tax on funds that online gaming companies collect from their customers will not need any further consultation or early review.

“There was no need to further consult the gaming industry and amendments to enable the tax will be brought in the monsoon session of parliament, which begins later this month,” Revenue Secretary Malhotra said.

“Unanimous, emphatic, equitable decision of GST Council on e-gaming. I am not the one to take this decision, but I don't think there is any chance of a review so early,” Malhotra added.

Source: Business Today

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