A group of 30 domestic and international start-up investors, including Tiger Global, Peak XV Partners, and others wrote to Prime Minister Narendra Modi to express their concern that the GST Council’s recent decision to levy a 28 per cent tax on the online real-money gaming sector.
In the letter, the investors said that it could lead to a ‘potential write-off’ of the $2.5-billion capital invested in the sector. The GST Council’s decision has ‘unintended consequence of equating the constitutionally protected legitimate online skill gaming industry with gambling, betting and other ‘games of chance’, the investors wrote in a letter.
ChrysCapital, Kalaari Capital and Bennett, Coleman & Company are other signatories in the letter.
“This will also adversely impact prospective investments of at least $4 billion in the next 3-4 years and hence the growth of the gaming sector in India,” the letter read.
The decision will also ‘substantially and meaningfully erode investor confidence in the backing of this or any other sunrise sector in the Indian tech ecosystem’, it said. businessline has viewed a copy of the letter.
Earlier this month, a Group of Ministers decided to impose 28 per cent GST on casinos, racecourses, and online gaming. “Online gaming, horse racing and casinos will be taxed at 28 per cent (all three activities) and they will be taxed on full face value,” it said.
The GST Council’s decision would lead to the equation of real money games with gambling, betting, and other games of chance, the letter further said. Instead, it suggested, an increase in the rate from (the current) 18 per cent to 28 per cent on the operator’s gaming revenue would have led to a 55 per cent increase in GST collection for the exchequer from this sector without adversely impacting the sector.
Three scenarios
The investors also put forth three different scenarios on the manner in which GST may be levied on the sector. In the worst case, the GST burden will increase by 1,100 per cent and on account of taxation of redeployed player winnings, the same money will get taxed repeatedly.
The letter also pointed out on job losses. “We submit most humbly, that this deleterious impact on the industry is expected to result in loss of over 50,000 high skilled jobs and a further loss of livelihood opportunity for over one million Indian citizens who are indirectly associated with this industry,” it added.
This comes at a time when nearly 100 gaming companies have also written to the government on the GST ruling.