28% GST rate on online gaming will have minimal impact on our overall revenues: Nazara Tech

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The decision by the GST Council to tax online gaming at 28% on full face value amount has shaken the industry. Nazara Technologies, in a statement this morning, has tried to allay the fears of investors and market participants, stating that the changes in taxation will have minimal effect on the company.

The company has clarified that the 28% GST rate is applicable on skill-based real money gaming segment, and the overall contribution of it for FY23 was recorded at 5.2% only.

Nazara currently offers Classic Rummy and Halaplay in the real money gaming segment and had recently revealed its plans to grow its presence in the sector, although it seems that those plans will have to wait for some time now.

The 50th GST Council meeting that took place on Tuesday, July 11 has not differentiated between skill-based games and chance-based games in terms of taxation and decided that the tax rate for online gaming, casinos and horse racing moving forward will be 28% on full face value amount.

Prior to the decision, several online gaming firms urged the government multiple times to differentiate between games of skill and games of chance and either keep the tax rate at 18% or, in case of an increase, at 28%. Importantly, they also wanted the tax to be levied on the gross gaming revenue and not on the full face value.

Several stakeholders expressed their displeasure after the announcement yesterday, calling it “the end of the gaming industry”. It remains to be seen what the next step will be from the industry.

Another important thing to note is that Nazara clarified that GST will apply on the real money gaming segment. This could potentially mean that there is still growth potential in the sector through esports, and companies might shift focus or look to expand.