Shares of digital gaming and esports company Nazara Technologies dropped by over 14 per cent today and Delta Corp’s shares fell by a whopping 28 per cent today.
New Delhi: After the 50th GST Council meet that happened yesterday, the government of India has imposed 28 per cent GST on online gaming, casinos and horse racing. The council has decided to do away with the distinction between game of skill and game of chance in the case of online gaming.
Now, tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing and on the full value of the bets placed in case of the online gaming. The changes will come into effect after an amendment in the GST law.
“The GST Council’s intention is not to hurt the online gaming industry or states with casinos. A few states shared their concerns. But there is a moral question: Can we encourage them more than essential goods? I am proud to say that the GST Council discussed and understood the matter deeply and took a decision which had been pending for 2-3 years. The issue is very complex,” Finance Minister Nirmala Sitharaman said.
India Inc. (Mostly) Disappointed
BharatPe co-founder Ashneer Grover has shared his views saying it’s the death of real money gaming industry in India.
“RIP – Real money gaming industry in India. If the govt is thinking people will put in ₹100 to play on ₹72 pot entry (28% Gross GST); and if they win ₹54 (after platform fees)- they will pay 30% TDS on that – for which they will get free swimming pool in their living room come the first monsoon – not happening ! It was good fun being part of the fantasy gaming industry – which stands murdered now. $10 Bn down the drain in this monsoon. Time for startups Founders to enter politics and be represented – or this is going to be spate industry after industry,” wrote Grover on Twitter.
Sumit Gupta, the CEO of CoinDCX, has said that the move would “wipe out the entire Indian gaming industry”. Gupta also said that the companies benefitting from this will be illegal offshore platforms.
1% TDS nearly killed the crypto industry in India, simply benefiting off-shore crypto platforms who are not complying with the Indian tax laws.????
28% GST on full face value on online gaming is going to similarly wipe out the entire Indian gaming industry, and yet again,…
— Sumit Gupta (CoinDCX) (@smtgpt) July 11, 2023
Shares of digital gaming and esports company Nazara Technologies dropped by over 14 per cent today and Delta Corp’s shares fell by a whopping 28 per cent today.
In 2022, online gaming companies in India clocked a turnover of Rs 13,500 crore, as per a report by Federation of Indian Chambers of Commerce & Industry and EY.
Amongst 400 million plus online gamers in India, 90-100 million played frequently. Real money gaming comprised 77 per cent of the segment revenues. As per the report, the online gaming sector is expected to report a total revenue of Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025, gross of taxes.
“The tax on CEA effectively creates a hostile environment for legitimate domestic platforms with an unrealistic tax burden and is counterintuitive to the measures that the government has taken to promote this sunrise sector,” said Bhavin Pandya, co-founder and co-CEO, Games24x7, according to Forbes India.
“Not only will it make the online gaming industry unviable, but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry’s image and capacity to survive,” said Malay Kumar Shukla, secretary, E-Gaming Federation.
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