The Indian gaming landscape, which comprises over 900 small and medium-sized gaming firms, may go for an early shakeout if the government continued its unfriendly policies and imposed heavy taxation, hinted Roland Landers, CEO, All India Gaming Federation (AIGF).
According to the industry apex body, there are currently over 900 gaming companies in India, a vast majority of which fall within the MSME sector. With an increase in GST liability of over 400%, a large chunk of entrepreneurs and start-ups who had innovated in the sector would be disproportionately impacted and may go out of the business.
“It may be noted that since the tax hike, multiple companies have announced their closure or widespread layoffs. We fear this trend will only increase in the coming months,” Mr. Landers expressed his apprehension.
Elaborating on several challenges in front of gaming players with the amendments being notified recently and the implementation of a new tax regime being planned from the first of October, he said the industry was left with just little over a month in hand to make the required adaptations to the new GST regime. Moreover, the associated rules still needed to be notified.
“The companies will have to make several changes at an operational level, including changes to their product on the technical side and adjustments in their long-term financial commitments on the business side, to fit into the new regime. These changes would involve a significant overhaul and restructuring of the business across the online gaming industry as well as the allied service industries,” he explained.
This will prove to be especially challenging for start-ups and MSMEs who will be disproportionately affected by the change and we hope that the government will give adequate time for the industry to transition to the new regime, as per Mr. Landers.
Highlighting the business risks involved under the current scenario, he indicated there could be a possibility of Indian online gamers, being unable to bear the increase in playing costs, migrating to platforms based offshore. It was evident that these platforms aim to move fast on the Indian audience which may find it increasingly difficult to bear the increase in playing costs due to the increase in GST burden.
Mr. Landers further said, “We have noted that several offshore online betting and gambling platforms are illegally offering their services within India. Several such platforms have begun to aggressively advertise their services in the aftermath of the announcement of the GST Council’s decision to tax the legitimate online gaming industry at the rate of 28%, up from 18% earlier.”
AIGF also warned that the current scenario may adversely impact the coffers of the government if unauthorised/unregulated platforms that offer illegal offerings were allowed to attract the Indian audience.
India’s gaming market was worth $2.6 billion in FY2022, and was expected to reach $5 billion by 2025. The online gaming industry has generated over ₹2,000 crore in GST revenue.
