“The company will proactively take steps to mitigate any potential impact to this segment of our business, and we anticipate minimal impact to our overall revenues,” it said in an exchange filing. “The company remains committed to its growth agenda and will continue to pursue organic and inorganic opportunities across various segments in which it operates.”
In a major setback to the country’s online gaming industry, the GST Council on Tuesday decided to levy 28% tax on the full value of monies paid by users. Moreover, GST on online gaming will be imposed without any differentiation of whether it is based on skill or chance.
Nazara Technologies’ shares were down 5.6% in Wednesday’s pre-open trade, at Rs 666.75, on the BSE.
Nazara Technologies had reported an 18% year-on-year (YoY) increase in consolidated net profit for the March quarter, at Rs 2.6 crore. Revenue from operations surged 65.2% YoY to Rs 289 crore. In FY23, gaming accounted for 37% of the company’s total revenue, while 49% came from eSports, and the rest from AdTech.
The company’s board earlier this month approved raising funding of up to Rs 750 crore. This will be the first fundraising activity by the company after its initial public offering (IPO) in March 2021, when it raised Rs 583 crore.
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Finance minister Nirmala Sitharaman said the government does not intend to kill any industry but gaming and gambling cannot be taxed lower than essential goods.Industry stakeholders have called the levy “unconstitutional and irrational”. The decision could potentially impact jobs and investments in the segment, companies said.
Bhavin Pandya, cofounder and co-chief executive officer of Games 24×7, said the move would “effectively drive consumers towards offshore and illegal platforms that pay no taxes, resulting in a loss of taxes and outflow of foreign exchange”.
According to a joint report by the Federation of Indian Chambers of Commerce & Industry and EY, online gaming companies clocked revenue of Rs 13,500 crore in 2022. The report estimated the segment would report revenue of Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025, gross of taxes.
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