Clarity on GST will push job growth in gaming, firms cautious now: Primus Partners head

According to Nilaya Varma, Co-Founder & CEO, Primus Partners, the 28 percent GST on the face value of the bets made by players is counter-productive.

More Indians are playing online games and the gaming market is growing, resulting in higher talent demand. However, no clarity around the levy of goods and services tax (GST) could slow down this growth with many smaller firms forced to shut shop, said a top official at consulting firm Primus Partners.

When it comes to hiring, gaming companies are being cautious at this point of time, said Nilaya Varma, Co-Founder & CEO, Primus Partners.

“Only clarity on GST can propel the growth in the industry now. My sense is that if a direction doesn’t come through in the next 3-6 months then people will move out. That’s how India has lost out in the past because we use tax as a substitute for policy and regulation. Dubai has been the biggest beneficiary,” he said.

The consulting firm in its report released on July 9 pointed out how the workforce of online gaming companies has grown at a compound annual growth rate (CAGR) of 97.5 percent from 2018 to 2023.

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India's online gaming market is expected to reach $2.4 billion by FY29, with a CAGR of 20 percent. In FY23, the market stood at $1.2 billion, which is expected to have increased to $1.4 billion by FY24.

The online gaming industry currently employs 1 lakh individuals, with projections for an additional 1.5 lakh jobs by 2025. In 2021, the industry employed 40,000 individuals.

“The online gaming industry is rising to become one of the key industries to provide employment in the next few years. The increase in the supply of online gaming platforms has impacted the employment structure in India creating diverse employment opportunities in areas like game development, technology and marketing, in turn fostering innovation and entrepreneurship within the gaming sector,” according to the report cited above, titled 'India’s booming online gaming industry'.

The key skills in demand for online gaming include machine learning, web 3.0, fintech, game mathematicians, audio engineering, among others.

However, Varma said that 28 percent GST on the face value of the bets made by players is counter-productive.

“Levying tax is a counter productive approach. This doesn’t keep the bad players away. Gaming offers well paying jobs. And gaming is entertainment. Entertainment is typically taxed at 18 percent but gaming is taxed at 28 percent,” he said.

The CEO noted that the marginal players are facing significant heat. “There are many smaller companies that have scaled down and are just maintaining the basic infrastructure. Investors are waiting for more clarity before their next round of funding. Only the larger players are retaining customers with the hope that the situation will settle down.”

The Indian online gaming sector raised a total investment of $412 million in 2020 and $549 million by the first quarter of 2021, pointed out BCG (Boston Consulting Group) and Sequoia estimates.

While the number of Indian online game providers went up from 30 companies in 2017 to 250 companies in 2018 and up to 1,584 by 2024, Varma said that If there is no clarity soon around GST and if the process is delayed then the gaming industry will end up losing firms.

The Primus Partners report highlighted an interesting aspect of male and female workforce growth in India’s gaming market.

Male workforce growth remained strong and consistent, with a CAGR of 69.88 percent.

The female workforce expansion outpaced overall growth, with a CAGR of 103.15 percent. “This trend not only reflects the industry's rapid development but also highlights its contribution to gender diversity and women's economic empowerment in the technology sector,” the report said.

It also added that the AVGC (animation, visual effects, gaming, comics) sector which has the potential to become the backbone of the nation's media and entertainment sector, has maximum contribution coming in from the gaming industry.

Gaming is estimated to have a 66 percent share in the overall revenues of India’s AVGC sector.

“India possesses the necessary ingredients to become a major contributor to the global AVGC sector. In 2019, the AVGC sector in India was valued at $2.3 billion, or roughly 0.7 percent of the global market. The sector is estimated to grow 2.2 times over the following four years, making up roughly 1.5 percent of the worldwide AVGC sector,” the report said.