GST proposal will reverse the growth trajectory of the industry: Online gaming companies write to the Government

The Indian online gaming industry, comprising about 130 companies and industry associations, have jointly signed on an open letter to the government expressing their concerns over the recently announced 28% GST on online games.

Titled “Save the Indian online skill gaming industry: 1 Million Indian jobs, 400 million Indian users and $2.5 billion investment”, the letter shares the industry’s distress over the GST council’s recent announcement.

Comapnies like Baazi Games, MyTeam11 Fantasy Sports, Nazara Technologies, Playerzpot, WinZO Games, Head Digital Works, have signed the letter.

The industry highlights that the recent recommendation by the GST Council clubs  online skill gaming, a constitutionally protected activity, with betting and gambling.

The industry also says that GST implementation will result in an unprecedented 400% - 500% increase in GST burden.

“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."

"Further, this decision will encourage illegal offshore gambling operators, drive Indian users to them and ultimately lead to neither optimal tax collection nor the growth of the legitimate industry,” the letter reads. 

The letter also says that taxing online gaming to the point of unviability contradicts ‘Digital India vision’. Further, the new tax regime debilitates “potential investors, both domestic and foreign, from considering the online gaming sector in India as a viable investment destination.” 

Online gaming companies currently pay 18% GST on GGR/ Platform Fee. The GST increase on GGR/Platform fee will result in a 55% increase in GST quantum.  The sector has appealed that the tax should only be levied on the platform fee/Gross Gaming Revenue that is earned by the industry.

"This is similar to any other technology service platform, where only the revenue that platforms earn are considered for the purpose of levy of GST. The industry stands in unison to request a viable and progressive GST regime and appeals for reconsideration of the current recommendation," the letter highlights.