The gaming industry has been facing continuous uncertainty after the recent GST Council meeting failed to address its request for a revised tax structure. Companies had proposed a more industry-friendly approach, levying a 28% GST on Gross Gaming Revenue (GGR) instead of the current system that taxes the full value of bets placed in online games.
High GST on gross gaming revenue blamed for industry slowdown
According to the industry, this high tax rate has triggered a series of negative consequences. Companies are facing funding constraints, job losses and reduced growth, leading to an overall sense of uncertainty.
Expert says decision a major disappointment
Manish Mishra, a partner at JSA Advocates and Solicitors, has expressed his disappointment at the Council's decision. He highlighted the industry's expectations for relief from the high tax burden and concerns regarding the retrospective tax demands.
Investor flight and startup struggles
A recent report by Ernst & Young (EY) and the US-India Strategic Partnership Forum (USISPF) painted a concerning picture as well. Since the new GST regime came into effect in October 2023, several gaming companies have reported a complete withdrawal of investment from major global players.
The report further reveals a significant increase in the tax burden for companies. Whereas previously the GST cost was around 15.25 per cent of revenue, it has now skyrocketed. For 33 per cent of companies, GST now consumes 50-100 per cent of their revenue, and for startups, it can even exceed total revenue. This situation forces many startups to operate at a loss.
The Indian government are doubling down on making the country a global manufacturing hub, the demand for electronics components and sub-assemblies is likely to scale by USD 240 billion by 2030, paving the way for USD 500 billion worth of electronics production goals while creating at least 2.8 lakhs new jobs by 2026.
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Inputs from IANS
