Several global investors having stakes in Indian gaming startups have requested the Indian government to maintain the current Goods and Service Tax (GST) rate imposed on gross gaming revenue rather than on total deposits.
This comes amid growing concerns that the GoM recommended rate of 28% will be finally adopted by the GST Council, the apex-decision making body. Currently skill games are taxed at 18%.
The investors issued a joint letter to the finance minister, Nirmala Sitharaman, on July 10. The investors include Rajan Anandan, the managing director of Sequoia Capital India and former Google India head; Navroz Udwadia, the cofounder of Alpha Wave Global; Ashish Gulati, the partner of Malabar Investment Advisors; Dan Sundheim, the founder of D1 Capital Partners; Rick Fortunato, the Tiger Global general counsel, among others, as first reported by Economic Times.
The GoM which submitted a report last month is currently reexamining the issue at the request of GST Council and is scheduled to meet on July 23 in Bengaluru and on July 24 in Goa to get industry perspective on taxation of horse racing and casinos, respectively.
The Finance Minister Nirmala Sitharaman during the last GST Council said the GoM has been given time till July 15 to study and submit a fresh report. The timeline was subsequently extended till August 10.
The investors who addressed the letter to the Finance Minister have earlier invested in gaming unicorns Mobile Premier League, Games24X7 and Dream Sports.
The investors stated that reevaluating the tax structure to 28 per cent on the contest entry amount or on total deposits, rather than the platform fees or gross gaming revenue, could make the business model of operators not feasible, and consequently lead to a profile ration of illegal operators.
According to reports, e-Gaming Federation, the Federation of Indian Fantasy Sports, and the All India Gaming Federation are scheduled to meet the GoM to finalise the recommendations before a final report is submitted to the GST Council, which is headed by Sitharaman.