Indian Government Declares 28% Tax on Revenue from Gaming Companies
The Indian government has announced a 28 percent tax on funds collected from customers by online gaming companies, a blow to the $1.5 billion industry. In India, where cricket is a national sport, sporting heroes frequently endorse gaming apps, but concerns have grown about potential addiction and financial losses among gamers.
The sector has been growing at a compounded annual rate of 28 to 30 percent and has attracted international investors. Tiger Global, a US investment firm, has backed Indian gaming start-up Dream11, the primary sponsor of India's national cricket team. The decision to tax online gaming was reached after extensive discussions, according to Indian Finance Minister Nirmala Sitharaman, who chairs the goods and services tax council, which is made up of state finance ministers.
Industry executives have stated that they may be forced to pass on the additional costs to their customers by raising game prices.
"The imposition of a 28% tax rate will pose significant challenges to the gaming industry." This increased tax burden will have an effect on companies' cash flows," said Aaditya Shah, chief operating officer of the gaming app IndiaPlays.
The decision was described as "unconstitutional [and] irrational" by Roland Landers, CEO of The All India Gaming Federation. The proposal “will bring game of skill at par with wagering contracts, which are in the nature of gambling and betting”, said Kishore Kumar, indirect tax lead at Taxmann.
In fantasy cricket games on Dream11, users create their teams by paying as little as 8 rupees (10 US cents) with a total prize pool of 1.2 million rupees ($14,565).