India’s billion-dollar online gaming industry is bracing for slower growth after a tax panel approved a 28% goods and services tax (GST) for the sector, which will be implemented from October 1.
Joy Bhattacharjya, director general of the Federation of Indian Fantasy Sports, said the decision “will set the industry back by a few years.” However, it’s also a chance for gaming firms to “rebuild and regrow.”
“The companies will also have to innovate much more than before and revisit the unit economics and re-look at the operational efficiencies,” he said.
Finance Minister Nirmala Sitharaman earlier noted that winnings from bets will not be subject to the tax. Still, Payal Thaker, a partner at BDO India, told Tech in Asia that the tax hike would certainly curtail the prize money pool, making it less attractive for the players and impacting their engagement levels.
For gaming companies, Thaker believes that larger players can bear some part of the tax cost by reducing their platform fee, while smaller ones may struggle to match. But the new policy, which also applies to casinos, will be reviewed after six months.
Tech in Asia has reached out to several Indian gaming companies for comments.
Last month, 28 investors, including Peak XV Partners and Tiger Global, urged Indian Prime Minister Narendra Modi to reconsider the proposed changes to the online gaming tax regulations.
The current GST proposal will set up the most onerous tax regime for the gaming sector globally, which will lead to a potential write-off of the US$2.5 billion capital invested in this sector,” the investors wrote at the time. “This move could force the closure of numerous gaming startups and necessitate substantial industry-wide restructuring for survival.”
Some of India’s most well-known gaming firms are Mobile Premier League, Dream Sports, WinZo, and Ashneer Grover’s CrickPe.
Most notably, Dream Sports, which owns e-fantasy gaming platform Dream11, was valued at US$8 billion in 2021 after securing US$840 million in funding.
Source:- Techin Asia