On 11 July, the GST Council imposed a 28% GST on the full face value of online Gaming companies. According to the GST Council’s decision, all online games will be subject to the highest GST rate, regardless of skill or chance. This decision was widely criticised by the gaming industry.

Since the GST Council’s announcement, online gaming companies have been in a state of panic. They wrote to the Ministry of Electronics and Information Technology (Meity), asking that the tax only be applied to gross revenue.

Around 130 online game companies and industry associations, including  Mobile Premier League (MPL), Nazara Technologies, Gameskraft Technologies and Winzo Games, have filed an appeal against the GST Council’s decision, claiming that it could have a huge impact on the survival of the industry. They also said that it would only give an edge to illegal platforms. Plus, they’re worried that it could cause thousands of people to lose their jobs.

According to the Internet and Mobile Association of India (IAMAI), the decision to impose 28% GST on “the full face value of the consideration instead of just the platform fee” will harm India’s digital economy and online gaming industry.

The companies asserted in an open letter that the Indian online skill gaming sector has an enterprise value of $20 billion and generates annual revenue of $2.5 billion. They further asserted that the sector is projected to experience a compound annual growth rate (CAGR) of 30% to reach $5 billion by 2025.

“The proposal to charge GST on full deposit value will reverse the growth trajectory of the industry. This would potentially have devastating implications (including the 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,” the letter read.

Credit: The Times of India

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