28% GST rate will kill many smaller players and deter new entrants: Saumya Singh Rathore

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In a recent interview with The Economic Times, co-founder of online gaming platform WinZO, Saumya Singh Rathore talked about how the government’s proposal to impose 28% GST on online gaming companies will adversely affect startups and entities planning to enter the industry.

Rathore explained that while there are some large gaming companies in the market, there are even more startups. While these large companies have a stable revenue model now, the startups need to create their IPs in the initial stages. With the increase in tax rate, they will struggle to keep up with the capital requirements to spend on IP creation which might lead to hampering of their growth prospects or even a collapse their business.

Speaking on the impact of increased taxation on the country’s business scenario, Rathore said that it will drive away global investors from investing in the sector, especially in early-stage startups that require capital the most.

Since the 28% GST rate is usually levied on luxury goods or sin items, putting online gaming in the same bracket might discourage investors as well as developers from making IPs that become a global hit, Rathore said. She believes that the luxury tax rate is used when it comes to items that are not necessary and avoidable, but in case of online gaming, the majority of the population participates in it on a regular basis with many people making their living out of it, too.

Rathore stated that around 90% of people on their platform belong to the middle and lower-income categories and come from non-urban areas. They use WinZO as an entertainment alternative to platforms like Netflix, Amazon Prime, etc.

On being asked about the government categorizing online games as permissible or non-permissible, Rathore said it is a great step to ensure the safety of Indian consumers as it will weed out illegal products in the market, but if not implemented properly, it will hinder fair market access for legitimate businesses as well.

Lastly, Rathore was asked to share her views on the legality of fantasy sports to which she said that the Supreme Court has already ruled them as games of skill. She concluded by saying that WinZO prioritizes creation of skill-based games.