Are you fond of daily fantasy cricket in India? Online fantasy games will become more expensive with the recent GST on online gaming. The impending 28% tax levied on online gaming may not be as appalling as we perceive it to be. Indians have withstood things like this earlier and will continue to do so. Beyond family and self-wellbeing, nothing is more meaningful to an average Indian under the sun. It is a federal decision, and until online fantasy sports companies move court, nothing will change much.
Online gaming, in its nascent stage in India, is poised to take off. But with the new GST, it cannot. The USA and China still dominate the online gaming industry, with a global market share of over 90% of online gaming. The tax on online games in China and the USA is about 10%. Considering the competition, India does not stand any chance. The taxation is a further nip in the bud.Online gaming in India contributes to the exchequer and generates a fair amount of goods and services, including jobs. Industry pundits expect India to be at a threshold of a boom in online gaming by 2025.The online gaming industry expects the subscriber base to rise from 100 million to 500 million. It will pump millions of monies into the economy. It is where the current federal government is eying on the big money rollover. They do not want to miss the train and want to grab the earning opportunity by cashing in on online gaming turnovers
Taxation in India
India has introduced multi-level taxation, and taxes have covered all areas of our lives. The taxes in India will soon turn out to be regressive if it continues this way. Our country has one of the highest tax rates in the world.
A 28% will affect online gaming players.
The tax makes no differentiation if the game requires skill or on chance (gambling). On implementation, users will pay Rs 28 per Rs 100 spent. The GST will invariably be passed on to the users, as it always does. It will cause Indian users not to play Indian online games. They would rather play international online games because these games will fall outside the ambit of Indian taxation. Hence, the cost of playing will be cheaper.
Effect on the industry
Industry players say the new GST will restrict them from flourishing the business. They will not invest in launching new online games for business expansion as the new GST will affect their cash flow. It will be a setback for the fantasy sports industry in India. The industry expects the revenue to touch Rs 25000 crore by 2027 but with this no hope.
The All-India Gaming Federation (AIGF) represents many online fantasy sports companies. They described the decision as unconstitutional, irrational, and egregious.The AIGF CEO Roland Landers stated the decision challenges the 60-year legal jurisprudence. The tax makes no distinction between the game of skill and gambling or wagering (betting). It will cause a loss of millions of rupees and eventually wipe out the Indian fantasy sports industry. It will trigger job losses, and users will move away from Indian fantasy sports. The request of online gaming companies is to levy an 18% tax instead of 28%.
Effect on FDI and Revenue
Joy Bhattacharjee, the director of the Federation of Indian Fantasy Sports, states the decision will affect the FDI of $2.5 billion invested. The tax will curb any more FDI in this segment and may cause users to move to illegal betting platforms. It will lead to risk and revenue loss for the government. It will curb the companies’ ability and interest to invest in innovations, research, and business expansions.
If the tax exceeds or dwindles revenue, online gaming will be an unviable proposition for new investors. It will make the online gaming black market operators thrive at the expense of law-abiding and tax-paying players.
The new GST of 28% will halt the growth trajectory of the fantasy sports industry. If the tax is on the gross gaming revenue of the gaming companies, it will be the death knell for the gaming companies. It will destroy the future growth of the booming Indian gaming sector.