“Change is inevitable. Change is constant,” Benjamin Disraeli, the UK’s former Prime Minister said. He could not have been more correct. The online real money gaming industry also underwent a major change as the 50th and 51st GST (goods and services tax) meetings implemented the 28% GST on face value in place of 18% GST on gross gaming revenue (GGR), blurring the lines between games of chance and games of skill.
As per a report by EY, the online gaming industry has grown at a compound annual growth rate (CAGR) of 28% from FY20 to FY23, culminating in a market value of Rs 16,428 crore in FY23. Industry estimates suggest that the market is expected to grow at a 15% CAGR to reach Rs 33,243 crore by FY28. The segment has attracted consistent investments totalling Rs 22,931 crore between FY20 and FY24 from both domestic and foreign sources.
Despite the increase in taxation, online gaming companies have accepted the changes in the taxation regime and complied with it. “ Companies have complied with the increase in the taxation rate. A majority of the companies are absorbing the taxation increase of approximately 350-400% and paying it out of their own pockets,” an industry expert on the condition of anonymity, told Brandwagon Online.
While the online real money gaming industry has welcomed the shift, the increment of the GST rate is going to affect the financial health of the industry, according to industry experts. “Online gaming companies have had to reinvent or tweak their business models to sustain operations and retain their user base. Many have also severely cut down on their marketing expenses, and unfortunately, some have also had to resort to layoffs. However, the industry is hopeful that with regulatory and tax certainty, it will be able to rebuild its foundation and reclaim its former growth trajectory over the next few years,” Joy Bhattacharjya, director general, FIFS, said.
The eventual shutting down of the companies would result in the target audience of these companies shifting to illegal websites, making it harder for the government to track them.
Industry experts believe that the conclusions being drawn are premature as it has been only a few months since 28% GST has been levied. “ With India’s favourable demographics, increased Internet penetration, and the government’s push to ensure safe, transparent, and accountable online gaming, the industry has the potential to rebuild itself and reclaim its growth trajectory,” Bhattacharjya, added.
It remains to be seen the trajectory of the online real-money gaming space as 28% GST continues to be applied all across the industry. Industry experts opine regulatory certainty and providing a predictable business environment would be key to ensuring the responsible growth of the sector. “As the industry has adhered to the government guidelines, it is now perhaps the time, for it to get the much-needed support, to grow and thrive,” a senior analyst, who did not want to be named.