Government says no need for rethink after online gaming tax backlash

Revenue Secretary Sanjay Malhotra

Revenue secretary Sanjay Malhotra Wednesday said government decision to impose a 28% tax on funds that online gaming companies collect from their customers will not need further consultation and an early review is unlikely, reported Reuters.

Shares of casino operator Delta Corp and other online gaming companies plunged in Wednesday’s trade after government, late Tuesday, announced to impose a 28% tax on fund that online gaming companies collect from their customers.

“There was no need to further consult the gaming industry and amendments to enable the tax will be brought in the monsoon session of parliament, which begins later this month,” Reuters quoted Revenue Secretary Malhotra as saying.  

“Unanimous, emphatic, equitable decision of GST Council on e-gaming. I am not the one to take this decision, but I don’t think there is any chance of a review so early,” Malhotra added.

Online gaming companies and investors plan to approach the government and the PMO to request a rethink, Reuters reported citing a source having knowledge of the matter.

Although the government said the decision was not intended to hurt the sector, but industry representatives don’t think so, they said the government new move could sap their earnings and lead to a loss of customers, jobs and investors.

The new tax “will render the legitimate online gaming industry unviable, effectively driving consumers towards offshore and illegal platforms that pay no taxes,” Games24x7, one of India’s biggest online gaming firms backed by investors such as Tiger Global, wrote in a LinkedIn post.

This will also lead to thousands of job cuts, it said.

The tax is also a threat to more than a thousand Indian gaming startups, which have been profitable, and now face increased costs and reduced users.

“The bigger players might have more capital to burn to get through this phase, but unfortunately startups will not have that chance,” Reuters reported Aaditya Shah, chief operating officer of IndiaPlays as saying.

He said there were about 1,182 realmoney gaming startups in India and estimated 95% would close in response to the tax.

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Updated: 13 Jul 2023, 01:54 AM IST

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