In a recent development, 30 startups from the online gaming industry have come together to voice their concerns and write to the Prime Minister Narendra Modi regarding the imposition of a 28% Goods and Services Tax (GST) on online gaming platforms.
Tiger Global, DST Global, Peak XV, Steadview Capital, and Kotak Private Equity, along with other global and Indian investors, have jointly appealed to Prime Minister Narendra Modi to review the newly introduced taxation policy on online gaming in India. They express concern that the “burdensome tax structure” could result in a substantial write-off of $2.5 billion and cause a loss of approximately 1 million direct and indirect job opportunities.
The sudden imposition of a 28% GST on online gaming platforms has caught many startups off-guard. Such a high tax rate poses a serious threat to their business models, making it challenging for them to maintain their competitive edge. The gaming industry relies heavily on attracting and retaining users, and an increase in costs due to GST may lead to a decline in user engagement and revenue. The real-money gaming segment accounted for 77 percent of India’s gaming sector revenues in 2022 which stood at Rs 13,500 crore, as per a recent FICCI-EY report.
Notably, Tiger Global has invested in the skill-based gaming unicorn Games24x7, while Peak XV has shown support for the real-money gaming unicorn Mobile Premier League (MPL) in the past. Additionally, Steadview Capital has investments in both fantasy sports major Dream11 and MPL’s game development studio, Mayhem Studios. The letter addressed to the Prime Minister was signed by various investors, including prominent Indian names such as Kalaari Capital, ChrysCapital, Orios Venture Partners, Lumikai, Kotak Private Equity, Malabar Investments, Smile Group, and Matrix Partners India, among others.