Indian and international investors in the online gaming sector have sent a letter to Prime Minister Narendra Modi expressing their concerns about the recent decision made by the GST Council. The decision involves imposing Goods and Services Tax (GST) on online gaming operators by changing the methodology of determining the “value of supply.” This shift moves away from the long-standing practice of charging Service Tax/GST based on the operator’s gaming revenue to levying GST on the “full value.”
In their letter, the investors highlight that this decision has unintended consequences as it equates the constitutionally protected legitimate online skill gaming industry with gambling, betting, and other activities based on “games of chance.” They had initially invested in the sector with the vision of making India the global gaming capital, fostering high-skilled job opportunities, attracting foreign capital investment, and establishing the country as a net exporter of innovation in gaming, animation, artificial intelligence, and visual effects.
While the investors appreciate recent amendments to the Income Tax Act and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which differentiated legitimate online gaming from other activities, they express their concerns about the potential adverse impact of the new GST proposal.
They assert that the skill-based real money gaming sector plays a vital role in supporting a significant portion of the game developer community across India, which aligns with PM Modi’s vision of making the country a gaming superpower.
The investors emphasize that the current GST proposal will establish an onerous tax regime for the gaming sector, potentially leading to a write-off of the $2.5 billion capital invested in the industry and adversely affecting prospective investments of at least $4 billion over the next 3-4 years.
According to the investors’ estimates, the online skill gaming industry contributes approximately ₹4,500 crore in GST at an 18% rate based on the operator’s gaming revenue. However, they predict an increase in the rate to 28% in the financial year 2024.
Additionally, the investors warn that this detrimental impact on the industry could result in the loss of over 50,000 high-skilled jobs and livelihood opportunities for over one million Indians indirectly associated with the gaming sector.
Seeking a resolution, the investors have requested a brief meeting with Prime Minister Narendra Modi or relevant officials in his office. They express their confidence in the Prime Minister’s leadership and commitment to creating an investment-friendly environment to help India achieve its target of becoming a $5 trillion economy by 2025.
