Investors in India's online gaming industry have written to Prime Minister Narendra Modi expressing concerns over the imposition of Goods and Services Tax (GST) on online gaming operators.
Investors in India's online gaming industry have written to Prime Minister Narendra Modi expressing concerns over the imposition of Goods and Services Tax (GST) on online gaming operators.
PremiumThe Indian and foreign investors in the online gaming industry have written to Prime Minister Narendra Modi regarding the recent decision by the GST Council to impose Goods and Services Tax on online gaming operators by changing the methodology of determination of "value of supply" from the decade-old practice of charging Service Tax/GST on the operator's gaming revenue to a levy of GST on the "full value".
In the letter, the investors said that the decision has 'unintended consequences' of equating the constitutionally protected legitimate online skill gaming industry with gambling, betting, and other "games of chance".
"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 read.
They also expressed their happiness over the amendment to the Income Tax Act and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules), where both pieces of legislation have drawn a clear distinction between legitimate online gaming activities, betting, gambling, and "games of chance" activities, and also brought in clarity for the sector.
The investors asserted that the skill-based real money gaming sector also supports a significant proportion of the game developer community across the country, who are pivotal to PM Modi's vision of making India a gaming superpower.
"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 added.
According to the investors, the online skill gaming industry is estimated to contribute approximately ₹4,500 Crore in GST at the rate of 18% of the operator's gaming revenue, an increase in the rate from 18% to 28% in the financial year 2024.
They also claimed that this deleterious impact on the industry 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.
The investors urged for a brief meeting with the Prime Minister or pertinent officials in the office. "We look forward to your continued leadership and greatly value your commitment towards creating an environment that will attract investments and help India reach its target of having a $5 trillion economy by 2025," the letter added.