Indian Online Gaming Industry Faces Uncertainty as GST Increases to 28%
Indian online gaming companies are expressing concerns over potential job losses and financial impacts after the Goods and Services Tax (GST) on online gaming, casinos, and horse racing was increased to 28%. The All India Gaming Federation (AIGF) has criticized the decision, claiming that it is unconstitutional, irrational, and damaging to the industry. They argue that the move will result in the closure of many businesses and leave numerous people unemployed. The AIGF further emphasizes that only illegal offshore platforms will benefit from this decision.
The higher tax burden is also expected to have a broader impact on India’s gaming industry, discouraging new players from entering the market and hindering overall economic growth. Online gaming players have repeatedly urged the government and the GST Council to levy an 18% GST instead of the current 28% rate. However, the concerns and requests of the industry have been largely ignored.
The implementation of the 28% tax rate is expected to pose significant challenges to the gaming industry in India. Companies will face cash flow limitations, which will restrict their ability to invest in innovation, research, and business expansion. Furthermore, game developers argue that skill-based games and betting platforms should not be treated in the same manner, as skill-based gaming requires a different regulatory approach.
The E-Gaming Federation (EGF), representing companies like Games 24×7 and Junglee Games, has echoed these concerns. They warn that excessive taxes that surpass revenues will render the online gaming industry unviable and give rise to black market operators, harming legitimate, tax-paying players. Kumar Shukla, EGF Secretary, also highlights the potential impact on employment opportunities and marquee investors heavily invested in the sector. The federation emphasizes that online gaming should not be equated with gambling and contends that various court decisions have recognized online skill-based games as legitimate business activities.
The decision to raise the tax rate on online gaming to 28% is likely to have far-reaching consequences. The Federation of Indian Fantasy Sports (FIFS) warns that it may drive users toward illegal betting platforms, posing risks to users and resulting in revenue losses for the government. Deloitte India’s Partner, Shilpy Chaturvedi, points out that the removing of the distinction between games of skill and chance will have implications not only for the GST but also for regulatory laws.
Following the news, shares of gaming companies have plummeted, with Delta Corp experiencing a drop of around 25% and Nazara slumping 4% on Wednesday. The implications of this decision are significant for the gaming industry in India. The higher tax burden, removal of the skill versus chance distinction, and the potential shift to illegal betting platforms may have lasting effects. It remains to be seen how the industry will adapt and whether the government will reconsider this decision in light of the concerns raised by various stakeholders.
