In a setback to a fledgling online gaming industry in the world’s second largest internet market, India’s Finance minister today announced a 28% GST to be levied on full face value for online gaming, casinos and horse-racing. 28% is the highest tax bracket in India indirect taxation system, and has expectedly attracted fierce criticism from the online gaming industry.
Elaborating on the rationale behind this decision, the FM Nirmala Sitharaman said that the intent was “not to end an industry” and that the decision was based on “moral front”. Speaking at the GST Council meet, Sitharaman said, “Our agenda is not to end any industry… all types of businesses have to function… there was discussion on the moral question that on one front, you do not want to end an industry. But that does not mean that you give more incentives to them than essential goods… all states participated in this decision which has been pending for the last 2-3 years. We could take the decision today because every state clearly participated in it”.
Expectedly, the online gaming and fantasy sports sector in India has responded with criticism for the decision. “We are disappointed that the GST Council and authorities have chosen to apply 28% GST on the total entry amount including prize money. As pointed out by Federation of India Fantasy Sports {FIFS} and many of its members on numerous occasions, change in valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer and loss of employment for lakhs of skilled engineers”, said Joy Bhattacharjya, Director-General, Federation of India Fantasy Sports {FIFS}.
India has seen rise of several prominent players in the online gaming and fantasy sports segment, several of them resulting in becoming unicorns. India has seen nearly $2.5Bn USD invested in startups across the online gaming and fantasy sports spectrum, with the government’s own think-tank ‘NITI Aayog’, estimating a future investment of nearly $1.3Bn USD in coming years. Dream11 is the most prominent of them all, with Nazara Technologies being the recent one in limelight, having become the first Indian online gaming company to make a stock market debut.
Nazara’s share price is down 3.6% at the time of writing, having recovered from an even worse Wednesday morning down of nearly 10%.
