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Global and Indian Investors Rally to Safeguard India’s Thriving Online Gaming Industry
Global and Indian investors, including Tiger Global, DST Global, Peak XV, Steadview Capital, and Kotak Private Equity, are urging Prime Minister Narendra Modi to review India’s recently announced taxation on online gaming. They believe that the “onerous tax regime” will have severe consequences, potentially resulting in a write-off of $2.5 billion and the loss of 1 million direct and indirect jobs.
The Goods and Services Tax (GST) Council, comprising federal and state finance ministers, had recently decided to impose a 28% tax at entry points on the full face value of online gaming.
In a letter to Prime Minister Modi, the investors expressed their concerns that this decision equates the constitutionally protected legitimate online skill gaming industry with gambling and betting, causing unintended consequences.
The investors had initially invested in the sector with the vision of making India the world’s gaming capital. They aimed to generate high-skilled jobs, attract foreign capital, and transform the country into a net exporter of gaming, animation, artificial intelligence, and visual effects innovation.
Tiger Global, other investors ask India to reconsider online gaming tax -letter https://t.co/OoPJsVkMGr pic.twitter.com/QCN2JvpCQb
— Reuters (@Reuters) July 21, 2023
Online gaming has experienced rapid growth in India, with fantasy sports startups leading the charge. Companies like Dream Sports, backed by Tiger Global and Alpha Wave Global, and Sequoia India-backed Mobile Premier League have collectively raised billions. The latter now holds an enterprise valuation of $20 billion.
Investors argue that the current GST proposal would establish the gaming sector’s most burdensome global tax regime. They fear this could lead to a significant write-off of the $2.5 billion invested in the sector and negatively impact prospective investments of at least $4 billion in the next 3-4 years, hampering the growth of the gaming sector in India.
The letter suggests several aspects for New Delhi to consider before implementing the new taxation rule:
- Clarifying the interpretation of “full value of bets” to prevent excessive GST burden on the gaming sector.
- Considering the full deposit value for GST levies, similar to casinos, to avoid a 350% increase in GST burden.
- Levying 28% GST on the Gross Gaming Revenue (GGR)/Platform fees, leading to a 55% increase in GST quantum, in line with internationally accepted practices.
The investors believe that addressing these concerns is crucial to ensure the survival and growth of the Indian online gaming sector, which has the potential to be a significant contributor to the country’s economy.
