RMG cos face heat amid 28% GST burden

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Central Govt’s decision to implement a 28% GST on online gaming has proved to be a big blow for the RMG (real money gaming) startups. Amid all the changes being implemented by the Govt, several startups have started changes in its structure to remain in surplus.

Presumably, the changes came in the form of Lay-offs and shutdowns in many RMG startups. Mobile Premier League (MPL), one of the most popular online gaming platform, recently laid off around half of its manpower owing to the GST hike.

Another gaming platform called Rush Gaming Universe by Hike let go of 22% of its workforce due to similar reasons. The company says that the new tax rate will effectively increase the tax by 400%, with which the company cannot survive.

Some new gaming startups have outright announced shutting down completely. The first of the lot being Quizy, who announced closure even before the 51st GST council meeting. The announcement came after Revenue Secy Sanjay Malhotra clarified that taxing the full face value on gaming will remain.

The situation is not made easy as both the parliament houses today (August 11) have passed the amendments related thereto.

GST Council’s relief still not enough

The GST council giving relief by taxing online the initial deposit amount. Still, it seems that taxing full face value itself is the harbinger of destruction for the RMG startups.

These news about lay-offs and closures in the RMG industry might continue for a while as more companies try to stay relevant. As soon as the new law comes into effect, the company may also shift tax burden to the users, which will create another issue of staggering player base.

The only respite they have is the Finance Minister promising to review the results of the new GST rate six months of its implementation.

Meanwhile, Zerodha co-founder Nikhil Kamath is calling this opportunity for other sectors of gaming including esports, casual, and AAA gaming to shine. The esports and gaming industry alone have the potential to make India one of the biggest gaming hub across the world.