GST Council’s Decision Puts the Future of India’s Online Gaming Industry at Risk
Online Gaming Industry
A recent report indicates that the total gaming market in India is projected to reach Rs 13,500 crore in 2022.
However, the GST Council’s decision to impose a 28 percent tax on online real-money gaming revenue has sparked strong objections from online gaming companies.
These companies argue that such a tax burden threatens to bring an end to the entire online gaming industry in India and will result in a significant loss of employment opportunities.
The CEO of the All India Gaming Federation (AIGF), Roland Landers, has strongly criticized the decision made by the GST Council.
Landers expresses the belief that the decision is not only unconstitutional but also awkward and flawed. He points out that the GST Council’s decision ignores 60 years of established legal beliefs and principles concerning online gaming.
The objections raised by online gaming companies and industry bodies highlight the potentially devastating consequences of the GST Council’s decision on the industry.
The implementation of a 28 percent tax rate threatens to impose a heavy financial burden on gaming companies, potentially stifling their growth and profitability.
Moreover, the fear of an entire industry collapse raises concerns about the resulting loss of employment opportunities for thousands of individuals employed within the online gaming sector.
The objections put forth by industry experts and gaming companies underscore the need for a comprehensive and balanced approach in regulating the online gaming industry.
The concerns raised indicate that the GST Council’s decision could have far-reaching implications for the growth, viability, and employment prospects of the online gaming sector in India.
The All India Gaming Federation (AIGF), a prominent industry body, represents a total of 150 members comprising various online gaming companies and game developers across different formats and categories.
Among the notable members of the federation are well-known entities such as Mobile Premier League (MPL), Gamescraft, Head Digital Works (A23), and Jupy.
The CEO of AIGF, Roland Landers, strongly believes that the decision made by the GST Council to impose a 28 percent tax on online gaming will have severe consequences.
He emphasizes that this decision has the potential to lead to the loss of jobs for hundreds of thousands of individuals involved in the industry.
Furthermore, Landers argues that the implementation of such a tax will inadvertently benefit illegal offshore platforms, which are considered to be in opposition to national interests.
Expressing disappointment, Landers points out that the opinions and suggestions put forth by Groups of Ministers (GoMs) from various states, who had conducted a thorough study of the issue, were seemingly disregarded during the decision-making process.
This lack of consideration for the insights provided by state-level authorities further adds to the concerns raised by the AIGF regarding the GST Council’s decision.
The statement made by Landers highlights the potential impact on employment and the inadvertent support that the decision may lend to illegal offshore platforms.
It underscores the AIGF’s contention that the decision lacks a comprehensive understanding of the gaming industry and the potential consequences it may have on both legitimate businesses and the broader national interest.
Amrit Kiran Singh, the Chief Strategy Advisor at Gamescraft Founders, expresses deep concern over the government’s decision to impose a 28 percent GST rate on online gaming.
Singh asserts that this move by the government effectively nullifies all the previous efforts made to support and promote the growth of the gaming industry in India.
Singh believes that the outcome of the GST Council meeting, where this decision was made, is detrimental to the nation’s interests.
He argues that imposing such a high tax rate will have severe repercussions, potentially leading to the destruction of many successful companies within India’s startup ecosystem.
This would not only hamper the progress of these companies but also undermine the overall growth and innovation in the gaming sector.
Furthermore, Singh points out that this decision underscores a lack of coordination among different departments of the government.
The imposition of a 28 percent tax rate on online gaming suggests a lack of understanding or alignment between various government entities regarding the potential consequences of such a decision.
Singh believes that a more cohesive and coordinated approach is necessary to ensure that policies and regulations support the growth and sustainability of industries like online gaming.
Singh’s statement emphasizes the adverse impact of the decision on the gaming industry and the startup ecosystem.
It reflects the concern that the decision undermines the government’s previous efforts to promote the industry and highlights the need for better coordination among different government departments to foster a supportive environment for businesses operating in emerging sectors like online gaming.
Singh further remarks that if online gaming in India is burdened with excessive taxes, it may prompt Indian gaming companies to relocate to other countries.
He suggests that the benefits that India should rightfully enjoy from the thriving gaming industry would instead flow to these alternative destinations. Singh views this potential outcome as a self-inflicted setback that could significantly impact India’s startup ecosystem.
The statement by Singh highlights the potential consequences of imposing heavy taxes on the online gaming sector.
It raises concerns about the potential loss of talent, investment, and economic opportunities that could result from companies choosing to establish their operations in more tax-friendly jurisdictions.
By warning about the potential migration of gaming companies, Singh underscores the importance of creating an enabling environment for the industry within India, one that fosters growth, innovation, and the retention of talent and resources.
Currently, online gaming platforms in India are subject to an 18 percent Goods and Services Tax (GST). However, the recent decision by the GST Council aims to increase this tax rate to 28 percent.
The real-money gaming segment constitutes a significant portion of the overall revenue generated by the gaming sector in the country.
According to a report published by FICCI (Federation of Indian Chambers of Commerce and Industry) and EY (Ernst & Young), in the year 2022, the real-money gaming segment accounted for approximately 77 percent of the total revenue related to the gaming industry in India.
The report further highlights that the total gaming market in India reached a valuation of Rs 13,500 crore during the aforementioned period.
This indicates the substantial growth and economic significance of the gaming sector in the country. The increasing popularity of online gaming, including real-money gaming, has contributed significantly to the overall market size.
The proposed increase in the GST rate from 18 percent to 28 percent raises concerns among industry stakeholders.
The higher tax burden could impact the profitability and growth potential of online gaming platforms, potentially affecting investment, innovation, and the overall vibrancy of the gaming sector.
The figures provided by the FICCI-EY report underscore the significance of the gaming industry in India and emphasize the need for a balanced tax policy that supports the industry’s growth while ensuring appropriate regulation.
A careful consideration of the potential impact on the sector’s stakeholders is essential to maintain a conducive environment for the gaming industry’s sustained development in the country.
