NEW DELHI: Top investors in the Indian gaming industry, including Tiger Global Management, Peak XV Partners, Chrys Capital and Kalaari Capital, knocked the doors of the Prime Minister’s Office (PMO) against the GST Council’s decision to approve a 28% tax on the full value of players contest fee. They claimed that the move will lead to “destruction” of the sector and result in job losses and withdrawal of investments worth billions of dollars.
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“The aforementioned decision, which has caused shock and dismay, will substantially and meaningfully erode investor confidence in the backing of this or any other sunrise sector in the Indian tech ecosystem,” the investor community said, claiming that $2. 5 billion capitalalready invested in the sector would need to be written off. “This will also adversely impact prospective investments to the tune of at least $4 billion in the next three-four years and hence the growth of the gaming sector in India… the change in methodology to apply GST rates on “full value” will result inwholesale destruction of the sector, including for many MSMEs and startups, which may no longer be able to sustain their business operations and will shut down with immediate effect. ”
The companies claimed that the decision will result in loss of over 50,000 skilled jobs and a one million more of those who are indirectly associated. “The industry also spends roughly $1 billion in advertisements, which wouldbe completely wiped off, leading to a cascading adverse impact on the larger media and entertainment industry. ”
They said that with a heavy taxation regime in the organised sector, there is a fear that unregistered and “unscrupulous platforms” will move in to attract gamers. urgent attention to this matter,” the investors said.
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The investors said if “full value of bets” is understood in amanner where GST is levied on every contest played every time with fully taxed winnings, the GST burden will increase by 1,100%. Further, on account of taxation of redeployed player winnings, the same money will get taxed repeatedly, resulting in a scenario where over 50-70% of every rupee will go towards GST, “thereby making the online real money skill gaming business model unviable”.
