A collective of 30 Indian and international investors has collaborated to convey their concerns to Prime Minister Narendra Modi regarding the proposed imposition of a 28% Goods and Services Tax (GST) on online gaming. In a joint letter dated July 21, prominent investors such as Peak XV Capital, Tiger Global, DST Global, Bennett, Coleman & Company Limited, Alpha Wave Global, Chrys Capital, Lumikai, and others have requested the Prime Minister’s intervention in the decision made by the GST Council. The investors argue that the council’s decision has caused shock and dismay, and it will significantly undermine investor confidence in not only the gaming sector but also any emerging sector within India’s tech ecosystem.
The key points highlighted in the letter emphasize that the current GST proposal will result in the most burdensome tax regime for the gaming sector globally. This could potentially lead to a write-off of the $2.5 billion capital invested in the sector. Additionally, the investors claim that this decision will have adverse effects on prospective investments of at least USD 4 billion over the next 3-4 years and hinder the growth of the gaming sector in India. Urgently requesting the Prime Minister’s attention, the letter concludes with a plea for intervention, stating, “…in light of the decision by the GST Council, we humbly request your kind and urgent attention to this matter.”
The investors further calculated that if the “full value of bets” is interpreted to include GST levied on every contest played with fully taxed winnings, the tax burden will increase by a staggering 1,100%. Additionally, the taxation of redeployed player winnings will lead to repeated taxation of the same funds, resulting in a scenario where over 50-70% of every rupee earned will go towards GST. As a consequence, the business model for online real money skill gaming will become unviable.
The investors argue that imposing a 28% GST on the Gross Gaming Revenue (GGR) or Platform fees will lead to a 55% increase in the GST quantum. This increase would make it extremely difficult for Indian online gaming operators to survive and contribute significantly to the Indian economy.
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