Clarity on GST is desirable, online gaming industry working on different business models: Thampy of Games24x7

The decision to levy 28% goods and services tax on net deposits in online real money games have brought more clarity to the sector although the industry will register comparatively slower growth. 

“The clarity is very desirable. Obviously, the industry was asking for 28% on gross gaming revenue. There was a possibility, we might have ended with 28% of entry fees, which would have been significantly problematic to say the least. Now 28% of deposits, it's somewhere in between the two,” said Trivikraman Thampy, co-founder and co-CEO, Games24x7. 

In a conversation with BT, Thampy said that the industry is trying to figure out how to change their business model to operate on a sustainable basis with 28% GST on deposits.  

“Is it going to be harder? Yes. Is business growth relative to what we had or would have had when it was 28% on GGR lower? Absolutely, yes. But the clarity is helpful,” he said, noting that while the industry was growing at nearly 30% CAGR, the growth will now half although the industry is of larger size. “So even a 15% CAGR over the next five years is actually quite incredible,” he underlined. 

Online gaming companies are now also looking at further regulatory clarity on issues around consumer protection and money laundering, he further said.  

The Centre is in the process of reviewing regulations on the online gaming sector amidst concerns over betting and money laundering. 

Thampy, who was attending the Indian Gaming Convention of the IAMAI on Tuesday briefly touched upon the GST notice sent to the company and said the matter is sub-judice. “Our hope is that we're able to find with the government constructive solutions around some of these legacy tax issues. It's all sub judice. I don't think I can say much about that,” he said.  

Meanwhile, a report by EY released at the convention on Tuesday projected that India’s online gaming segment is projected to grow at a CAGR of 15% to reach Rs 33,243 crore by FY28 from about Rs 16,428 crore in FY23 as against a CAGR of 28% between FY20 to FY23. The industry is estimated to grow to Rs 19,974 crore by the end of the current fiscal.  

The real money games sector comprises 83% of the online gaming industry in India while non real money games and e-sports comprise account for about 17%.  

It has also estimated that the real money game industry will contribute about Rs 6,500 crore to Rs 6,800 crore between FY23 and FY28 to direct taxes and as much as Rs 75,000 crore to Rs 76,000 crore in indirect taxes or GST in the same period. 

“Future growth is expected to be driven by heightened demand for mid core and hard core games, soaring popularity of e-Sports and an increase in app purchases,” it said. 

In FY23, India had the second largest number of online gamers globally at 42.5 crore and 1,400 online gaming start-ups. As much as Rs 22,931 crore was invested in the sector between FY20 and the current fiscal till date.  

Also Read: 71 notices sent to online gaming firms for GST of Rs 1.12 lakh crore: MoS Finance in RS