Top investors in India’s gaming sector have written to Prime Minister Narendra Modi, requesting a review of the implementation of the GST Council’s recent decision to levy a 28% tax on the full value of bets placed by users, terming it the world’s most onerous regime that could wipe out $2.5 billion of existing investments and more than 50,000 high-skilled jobs.
Prospective investments to the tune of at least $4 billion, planned over the next 3-4 years in the gaming industry which had a revenue of almost $3 billion in 2022 in India, could also be hit, according to the communique to the PM jointly signed by 11 domestic or India-focused investors such as ChrysCapital and Kotak Private Equity, and 19 overseas investors, including Tiger Global.
‘Shock and dismay’
Stating the tax levy plan has caused ‘shock and dismay,’ they added that it would “substantially and meaningfully erode investor confidence in the backing of this or any other sunrise sector in the Indian tech ecosystem,”
Skill-based, real-money gaming is India’s largest gaming sub-sector and also supports a significant proportion of the game-developer community across the country who, the investors pointed out, “are pivotal to the PM’s vision of making India a gaming superpower”. There are about 400 Indian start-ups funded by marquee global investors in real money gaming.
Seeking time for a brief meeting with the PM or officials concerned in his office, the investors emphasised that they back a robust, certain and fair taxation regime that aligns with the government’s socio-economic development goals.
Noting that the online skill gaming industry is estimated to contribute approximately ₹4,500 crore in GST at the rate of 18% of the operator’s gaming revenue, the investors said raising this extant rate to 28% would have led to a 55% increase in GST collections without adversely impacting the sector.
“This would have also ensured that the practice is in line with how GST/VAT is levied on gaming across most international markets… in 2000, the U.K. moved to a model of 15% tax on the operator’s gaming revenue, creating one of the largest and most sustainable gaming markets. In France, the Senate has noted that a tax model on full value does not work and is reverting to a model of taxation based on operator’s gaming revenue,” the missive added.
“However, the change in methodology to apply GST rates on “full value” will result in wholesale destruction of the sector, including for many MSMEs and start-ups, which may no longer be able to sustain their business operations and will shut down with immediate effect,” they cautioned.
