Posted on: September 26, 2023, 01:34h.
Last updated on: September 26, 2023, 01:34h.
A new 28% tax on India’s iGaming industry is set to take effect on October 1. This decision by the Goods and Services Tax (GST) Council, announced in July, has sparked strong reactions and concerns within the industry.
More than 100 gaming companies and investors, including Tiger Global and Peak XV, have reached out to the government, urging them to reconsider the 28% tax due to the potential harm it poses to the industry’s existence.
In August, the GST Council agreed to review the levy six months after implementation but maintained their decision to impose the tax.
The Council has also clarified the valuation rules for the levy, stating that online gaming will be taxed based on the full-face value of bets placed in online gaming, casinos, and horse racing.
Finance Minister Nirmala Sitharaman has emphasized that the intention is not to harm the industry but to close a loophole and eliminate any distinction between “games of skill” and “games of chance.”
The current valuation of India’s online gaming industry is approximately $1.5 billion. As reported by Casino.org, online gaming represents one of the country’s fastest-growing consumer internet businesses.
Preparations for October Implementation
The Indian government has mandated that offshore online gaming companies operating in the country must register their business locally. Additionally, they may need to appoint a representative to pay taxes on funds collected from customers.
The GST Council has warned that overseas online gaming companies operating in India will be blocked if they fail to comply with the registration requirement.
“Offshore online gaming companies will not have any tax advantages and will be treated equally with domestic counterparts,” explained Rajat Mohan, a partner at AMRG & Associates.
Last month, Indian gaming app Mobile Premier League announced layoffs of 350 employees as it aims to “survive” the government-imposed tax.
In April, Casino.org reported on gaming operators targeting India for violations of the country’s tax laws, an effort that also aims to combat money laundering.
Hiring Pauses Surge as Tax Deadline Approaches
The online gaming industry in India has experienced significant growth in recent years.
Tracxn reports that there are over 1,000 gaming startups in India that have attracted both domestic and foreign investors.
Since the announcement of the new tax, staffing firms and job portals have observed a decline in job postings ranging from 25% to 60% across large and startup companies. This trend may indicate that companies are reevaluating their strategies.
Despite the backlash, the government asserts that the tax is justified, as companies have paid minimal taxes until now on the fees they charge for providing real money games.