28% GST levy will make Indian real-money gaming sector an 'unviable business model': IAMAI

Internet and Mobile Association of India (IAMAI), an industry body that represents India's top tech companies, said on July 12 that it is "deeply concerned" by the GST Council’s decision to levy 28% tax on the real-money gaming sector.

The decision will have "many ramifications" on the country’s digital economy and online gaming industry, it said.

The industry body has urged the GST Council and the central government to reconsider this decision.

This development comes after IAMAI witnessed a rejig in its executive council with Dream Sports co-founder and CEO Harsh Jain as chairperson, and MakeMyTrip co-founder and Group CEO Rajesh Magow as vice chairperson in May 2023.

IAMAI counts over 500 Indian and multinational corporations as its members. Among its prominent gaming members include Dream Sports, Mobile Premier League, Gameskraft, Nazara Technologies and Games24x7.

On July 11, the GST Council decided to impose the top GST slab of 28 percent on the full value of the money paid by users to play skill-based games, in a uniform manner with no distinction made between game of skill and chance. Gaming platforms currently pay an 18 percent GST on platform fees.

The industry body however mentioned that online gaming is different from gambling and betting.

Therefore, taxing the country's online gaming industry with gambling activities will not only "massively dent" the fast-growing online gaming sector but will also "threaten to make the entire $20 billion sector an unviable business model".

Read: 28% GST levy will upend the economics of real-money gaming sector, says Nazara's Nitish Mittersain

Further, the body stated that the new tax structure is contrary to global best practices, where GST on online gaming is levied on the platform fee or Gross Gaming Revenue (GGR).

During consultations, the industry had proposed to the GST council that the 28 percent GST should be charged on the platform fee, which has been the valuation method so far, it said.

"The net effect of this levy will result in an approximate 1,000% increase in GST on the industry and will cause irreversible damage to the $2.5 billion investments in the Indian online gaming startup ecosystem and lead to a complete halt on any prospective FDI," the industry body said in a statement.

Read: 'Will wipe out the entire industry', say online gaming cos after GST set at 28%

It will also serve as a huge blow to India’s "ambitious target to achieve a $1 trillion digital economy by 2025", the body said.

Further, the move will put Indian gaming companies at a significant disadvantage against offshore gaming companies and "put a hard stop to any plans of India becoming a global hub for online gaming", it said.

It's worth noting that these tax rates do not apply to free-to-play and paid video games, wherein the 18 percent GST rate is already included in the app sales on Google Play and Apple App Store.

The industry body stated that it will continue to engage with the GST Council and other stakeholders to ensure that the "final GST levels being considered do not hinder the innovation, FDI and the growth of this industry".

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. These revenues are set to grow to Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025, it said.