Out of 12 companies which were surveyed, as many as 10 companies faced significant headwinds on employment creation. Four companies ceased hiring but did not lay off any employees. One-third of the companies laid off as many as up to 50% of their workforce. Also, one company had to lay off more than 50% of the people and one had to shut down their operations. EY report titled ‘Impact of new GST law on skill-based online games’ states,
Reportedly, a sunrise sector that was experiencing an exponential revenue growth where some of the companies had growth rates as high as ranging between 100-200% prior to Oct 2023, saw a decline in performance post 28 % GST imposition on the full value of the deposit amount.
Out of total 12 companies surveyed by EY, only five outlets recorded growth in revenue. Before Oct 23 GST accounted for only 15% of the company’s total revenue but after Oct 23, seven out of 12 company decided to absorb the GST heat and not pass it to the users. Among the companies who decided to not pass the tax to the users, four organisation’s GST share jumped to 50-100% while for other three early stage companies for whom net deposits are negative, the GST cost surged over 100% of the revenue.
Reportedly, a huge impact on revenue is also reflected in job erosion. Out of the 12 companies, as many as 10 companies faced significant headwinds on employment creation. Four companies ceased hiring but did not lay off any employees. One-third of the companies laid off as many as up to 50% of their workforce. Also, one company had to lay off more than 50% of the people and one had to shut down their operations.
The report also suggests that, among 12 companies, four companies has not been able to attract capital and will move out of the sector if taxes are not normalised. Three companies are bleeding equity capital, next round looks difficult for them also they are looking for buyers. One company, which was profitable before Oct 23, turned into a loss making company. Two company were highly profitable before the tax imposition but now it is only making profits with lower margins.