Real money gaming firms on shaky grounds after increased 40% GST

Real money gaming (RMG) firms are bracing for the impact of a steeper 40 per cent goods and services tax (GST), up from 28 per cent earlier, as the Centre considers bringing all “sin goods” under the higher levy. Several players in the industry said that they would be either forced to move their business offshore or shut down.

 

Meanwhile, top executives said they have not received any formal communication yet, adding that preliminary discussions were underway on how to address the issue.

 

RMG firms are already reeling under the 28 per cent GST regime, with companies absorbing the tax burden instead of passing it on to customers to keep engagement on their platforms steady.

 

However, any further hike in GST is expected to sharply raise the tax burden on these firms, which executives warned could drive more users to offshore platforms. 

 

“The exact impact can only be assessed after some preliminary discussions internally,” a top executive with a gaming company said.

 

Executives added that smaller gaming companies may have to shut operations if a higher tax burden is imposed.

 

“We have received no formal communication on the GST yet. We had already tweaked unit economics under a 28 per cent regime to ensure sustainability. The new slab will be unsustainable from an operational perspective,” a second executive said.

 

In the digital world, RMG refers to skill-based games such as rummy, poker, or fantasy sports, among others, where players can stake money to compete for cash rewards. The 28 per cent slab was imposed on the sector in October 2023.

 

Major companies in the space include Dream11, Games24x7 and Head Digital Works.

 

Last month, RMG firms had opposed the imposition of 28 per cent GST on their services in the Supreme Court, arguing that the levy was fundamentally flawed and contrary to the legal framework. 

The petitioners explained to the court the distinction between platform fees, on which GST is already paid, and prize pool contributions made by players, which are held in trust and returned to winners. They claimed that prize pool contributions do not constitute consideration and thus cannot be taxed under GST.