The online gaming industry in India may have had its fate decided by the GST Council. Despite hopes that changes would be made during the recent meeting, Union Finance Minister Nirmala Sitharaman declared that the 28% GST on online gaming will remain. This decision has caused concern among those in the industry who fear it will cause permanent damage. However, the Centre seems to be taking steps to regulate the sector and address issues related to online gambling.
What is causing the uproar in the industry?
Even though it has received a lot of backlash from the industry and its supporters, the 28% GST is still set to take effect starting October 1. Online gaming companies are concerned that this change will negatively impact the sector in India, causing players to turn to offshore platforms to avoid higher taxes. The Federation of Indian Fantasy Sports (FIFS) has stated that this could cause “irreversible damage,” while a survey conducted by the Esports Players Welfare Association (EPWA) found that 61 out of 100 online gamers may stop playing altogether.
The All India Gaming Federation (AIGF) said, “We believe the decision by the GST Council of valuation on deposits will severely impact the online gaming sector”. AIGF believes that hefty taxation might lead to a majority of the players facing issues in surviving. The more established gaming companies would scrape by, but the smaller businesses will inevitably suffer.
Broadband India Forum (BIF), a policy forum and think tank, believes that 28% GST will be tough on online gaming. It states that the changes will dampen the industry that has the potential to generate massive revenue. BIF warned that heavy taxation will work against the Centre’s goal of curbing gambling since it will lead to the rise of black market operators. The firm claimed that 95% of the industry is small businesses and entrepreneurs, many of whom would likely be forced to exit the market.
BIF further added that foreign investment could tank due to this decision. Online gaming firms spend around a billion US Dollars on advertising in India, which could be significantly cut down. So the decision impacts the media and entertainment industries and may also cause people to lose their jobs. Similar to other industry players, the BIF has also urged the ministry to reconsider the decision and not wait another 6 months.