In the last 5 years, Indian online gaming organizations have generated at least 2.8 billion USD from investors across the world. Moreover, the expansion of this industry has also influenced employment positively, creating lakhs of direct and indirect jobs. However, the recent GST hike on India’s online gaming might impact the market trends significantly.
What is the GST increase on online gaming?
Previously, the rate of GST on online gaming was 18%. However, a ministry report issued in June 2022 suggested a hike in this rate. The ministry recommended a revision to fix the GST rate at 28%, which came into effect on 1st October 2023. This flat 28% GST applies to the whole amount an online gaming company receives from the player, irrespective of whether it is a chance-based or skill-based game. This rate is also applicable to horse racing and online casinos where new customers can claim this Bwin welcome bonus.
What are the potential impacts of higher GST?
The tax structure imposed by India’s apex body on online gaming has been touted as the harshest tax model in the world.
Levying 28% GST on the complete amount collected from players will impose an unnecessary tax burden on the online gaming market. It is likely to have widespread effects on India’s online gaming landscape, dealing a major blow to the sustainability and profitability of online gaming companies.
The GST increase might restrict the industry’s evolution and development by dwindling the profit margin of online gaming companies and deterring investors. Besides, gaming companies will now have to bear three times the tax burden, along with mandatory compliance costs.
Increasing the GST rate can potentially discourage players from online gaming since they will have to shell out 28% GST regardless of whether they win or lose. So ultimately, this will impact the growth of the online gaming sector.
However, this is only the partial picture since industry insiders are eyeing a bright future for India’s online gaming landscape.
How can higher GST impact market trends?
Those in leadership positions believe that online gaming in India will witness considerable changes and major trends even after this GST hike.
They assert that 2024 will see the rise and dominance of cloud gaming since it offers supreme convenience and security to players. Cloud technology will attract new gamers, eliminating the need for advanced gaming systems and democratizing access to sophisticated, immersive gaming experiences.
VR, AR, and Metaverse are also expected to play a pivotal role in reshaping the online gaming industry, creating a new generation of socially engaging and highly interactive games. The future of online gaming in India is expected to be highly dynamic and lucrative, with significant proliferation of competitive games, and e-sports strengthening its hold as a major force in the market.
While 28% GST will indeed pose a challenge, online gaming companies can overcome that and set new trends and benchmarks. Collectively, as these trends assume center stage, they point towards a future, where online gaming becomes more accessible to the masses, offering a more sophisticated and fulfilling gameplay experience.
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