The online gaming industry is bracing for significant job cuts as a result of recent developments. On July 11, 2023, online gaming companies expressed concerns over the imposition of a 28 percent goods and services tax (GST), which they believe will hinder their ability to invest in new games, affect cash flows, and lead to unemployment.
The GST Council has approved this tax rate for online gaming, casinos, and horse racing, applying it to the full face value.
The all India gaming federation (AIGF), representing major companies like Nazara, GamesKraft, Zupee, and Winzo, has criticized the decision by the council, stating that it is unconstitutional, irrational, and severe. They argue that the decision disregards long-standing legal precedents that distinguish online skill gaming from gambling activities.
The AIGF warns that the industry will be decimated, resulting in the loss of hundreds of thousands of jobs and benefiting only illegal offshore platforms.
Despite the central government’s past support for the industry, it is regrettable that such an untenable decision has been made. The increased tax burden will have a detrimental effect on the thriving gaming economy, discouraging new entrants and impeding job creation and overall sectoral growth. Online gaming stakeholders have consistently urged the government and the GST Council to impose an 18 percent GST rate instead of the recommended 28 percent, as proposed by the Group of Ministers (GoM).
The E-gaming federation (EGF), which includes members like Games 24×7 and Junglee Games, argues that an excessive tax burden surpassing revenues will render the online gaming industry unviable.
The EGF maintains that online gaming should be distinguished from gambling, emphasizing that the Supreme Court and various High Court rulings have recognized online skill-based games as a legitimate business activity protected under the Indian constitution.
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