28% GST On Online Gaming: Top VCs Write To PMO, Says It’s $2.5 Bn Write Off

Amid ongoing 28% GST issue in online gaming, as many as 30 domestic and Indian investors have written to the Prime Minister of India (PMO) to reconsider the taxation issue.

The letter is signed by investors including Kalaari Capital, Peak XV Partners, Orios Venture Partners, Tiger Global Management, Alpha Wave Global, among others.

“The decision of the 50th GST Council has the unintended consequence of equating the constitutionally protected legitimate online skill gaming industry with gambling, betting and other “games of chance”. We invested in this sector with the vision to make India the gaming capital of the world, and make the country a net exporter of innovation in gaming and allied areas,” the letter said.

Earlier this month, the GST Council gave a major blow to the real-money gaming industry with its decision to levy 28% GST on full face value for online gaming companies, with no distinction between games of skill and games of chance.

The group of investors also noted that skill-based Real Money Gaming is India’s largest gaming sub-sector. The skill-based real money gaming sector also supports a significant proportion of the game developer community across the country, the letter said.

The industry attracted $2.5 Bn in global funding across approximately 400 Real Money Gaming startups, the letter noted, adding that some of these startups are unicorns as well.

“The current GST proposal will set up the most onerous tax regime for the gaming sector globally, which will lead to a potential write-off of the $2.5 Bn capital invested in this sector. This will also adversely impact prospective investments to the tune of at least $4 Bn in the next 3-4 years,” the investors said.

The impact on the industry may result in loss of over 50,000 high skilled jobs and a further loss of livelihood opportunity for over 1 Mn Indian citizens who are indirectly associated with this industry, the letter said.

“The industry also spends roughly $ 1 Bn in advertisements, which would be completely wiped off, leading to a cascading adverse impact on the larger media and entertainment industry,” it added further.

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