Several investors have written to Prime Minister Narendra Modi to reconsider the decision of 28 percent GST on online gaming taken by the GST Council recently.
‘Against legal precedents’
Among the 30 domestic and foreign investors that have penned the letter are Tiger Global, Peak XV Partners (erstwhile Sequoia Capital India), Steadview Capital and Alpha Wave.
The letter states that the 28 percent tax is against legal precedents and could have a detrimental impact on prospective investments worth $4 billion in the online gaming sector.
Harshest tax regime in the world
They warned that the current GST proposal will set up “the most onerous tax regime for the gaming sector globally”.
“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 $2.5 Billion capital invested in this sector which will adversely impact prospective investments to the tune of at least $4 Billion in the next 3-4 years and India’s gaming sector,” the letter said.
It goes on to say that the decision has ‘unintended consequences’ of equating the legitimate online skill gaming industry with gambling, betting, and other “games of chance”.
Jobs
They stressed the impact of the Council’s decision on employment opportunities, saying that it is expected to result in the loss of over 50,000 high-skilled jobs and a further loss of livelihood opportunities for over one million Indian citizens who are indirectly associated with this industry.
“We invested in this sector to make India the gaming capital of the world, which would help in generating, among other things, high-skilled jobs, billions in foreign capital and make the country a net exporter of innovation in gaming and allied areas such as animation, artificial intelligence, and visual effects,” the letter stated.
Game developer community
The investors asserted that the skill-based real money gaming sector also supports a significant proportion of the game developer community across the country.
This community plays a significant role in the government’s plans towards making India a gaming superpower.
Separation between online gaming and gambling
The investors expressed appreciation for the amendment to the Income Tax Act and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules).
The amendment introduced makes a clear distinction between legitimate online gaming activities, betting, gambling, and “games of chance” activities, and also brought in clarity for the sector.
Decision change unlikely
The investors urged for a meeting with the Prime Minister or the concerned officials.
Minister of State for Electronics and IT Rajeev Chandrasekhar on July 17 said that his ministry will request the GST Council to reconsider the tax on online gaming.
However, sources suggest that the outlook doesn’t look good.
