The Indian government announced that it will levy 28% on all funds that online gaming companies earn from clients. This move is a blow to a $1.5 billion industry that has grown in popularity and attracted foreign investment. In addition, companies have so far paid little tax on the fee they charge for providing real money games and this move by the government is a huge blow to a $1.5 billion industry that has grown popularity and lured foreign investment.
The iGaming companies disagree with the decision:
Commenting on the government’s decision, Finance Minister Nirmala Sitharaman said:
“The decision to impose tax on the total amounts gaming companies collect was taken after consultation with states, and the intent was not to hurt the industry.” However, representatives of the iGaming industry seem to disagree with the Minister, saying that “it would sap their earnings and the extra charges were likely to be passed on to customers.” What’s more, Aaditya Shah, chief operating officer at the gaming app IndiaPlays, added:
“The implementation of a 28% tax rate will bring significant challenges to the gaming industry. This increased tax burden will affect companies’ cash flow.” Roland Landers, CEO at The All India Gaming Federation said that the decision was “unconstitutional and irrational.” It will wipe out the entire Indian gaming industry and lead to lack of job losses and the only people benefiting from this will be anti-national illegal offshore platforms.”Reason for the Government’s decision:The main reason behind the aforementioned government decision is that although the gaming apps are supported by sports champions in India, where cricket is the most popular sport, concerns have been raised about financial losses and potential addiction.
However, the aforementioned apps are one of the reasons for the large investments in the online gaming industry. The aforementioned apps have had a huge impact on India’s gaming industry. Dream11 is the flagship sponsor for the Indian National Cricket Team, supported by Tiger Global, and has an $8 billion budget. Dream11 allows players to create their own fantasy cricket teams for just 8 rupees (10 UScents). They can also win up to 1,2 million rupees (14.565 USD) by playing the games. Peax XV (formerly Sequoia Capital India) has also invested in MPL. But Dream11 and MPL did not provide an answer when asked for a comment.
In this regard, during this month, Redseer consultancy said:
“The revenue of fantasy gaming platforms during the popular Indian Premier League cricket matches rose 24% from a year earlier to over $342 million with over 61 million users participating.”