“The proposal to charge GST on the full deposit value will reverse the growth trajectory of the industry. This would potentially have devastating implications (including shutdown of businesses) for MSMEs (micro, small and medium enterprises) and startups that may not have the capital reserves to withstand such a sharp tax increase,” said the letter.
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The letter, a copy of which has been seen by ET, was also signed by gaming industry bodies such as the All India Gaming Federation (AIGF), E-Gaming Federation (EGF), Federation of Indian Fantasy Sports (FIFS) and All India Game Developer’s Forum (AIGDF) were also signatories to the letter.
While the AIGF represents companies such as MPL, Zupee and Paytm First Games, EGF represents companies including Games 24×7 and Junglee Games. FIFS is backed by platforms such as Dream11 and Fantasy Akhada, in addition to a dozen other fantasy sports operators.
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The signatories also said that the imposition of GST on full value would “debilitate potential investors, both domestic and foreign, from considering the online gaming sector as a viable investment destination”.
Also read | GST tweak may cost 40 online gaming companies Rs 10,000 crore
They said, “It may be noted that the impact will not only be on attracting fresh capital in gaming but would have a far wider impact on the Indian startup ecosystem as a whole, as the majority of these financial institutions invest across sectors and a favourable regulatory landscape is one of the single most important drivers for FDI (foreign direct investment). In addition, the current $2.5 billion plus in investments is at stake basis this decision.”
ET reported Saturday that online gaming companies are in a huddle and are deliberating next steps, which include seeking clarifications from the government on applicability of the GST. These include queries such as whether the tax will be levied if a user enters a new contest with the winnings from a previous one.
Also read | Online gaming companies seek more clarity on GST
In the open letter, the companies said that the online skill gaming sector in India has a $20 billion enterprise valuation and it generates annual revenue of $2.5 billion. The industry is expected to grow at a 30% compound annual growth rate to reach annual revenue of $5 billion by 2025, they said.
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