RMG Industry’s GST Struggles to Continue With No Relief Expected in Upcoming GST Council Meeting

Once a beacon of innovation and economic potential, India’s Real-Money Gaming (RMG) industry is fighting for survival. The culprit is the crippling Goods and Services Tax (GST) policy change implemented in October 2023. This shift from an 18% tax on Gross Gaming Revenue (GGR) to a 28% levy on all initial player deposits – a massive 300-500% hike – has sent shockwaves through the industry, threatening its long-term viability.

The pain inflicted by this policy change is compounded by a tsunami of retrospective tax notices. The GST department, applying its new calculations back to 2017, is demanding a staggering ₹1.12 Lakh Crores from the entire sector. Industry leaders like Dream11, Gameskraft, and Delta Corp. are caught in a desperate legal struggle against demands threatening their existence, with the matter currently pending a final hearing in the Supreme Court.

The industry placed its hopes in the June GST Council meeting, where a much-needed policy review was expected once the new government was formed. However, a senior government official has dashed those hopes, confirming that the 28% GST on full deposit values will remain unchanged. This betrayal comes despite the Finance Minister’s promise of a review after six months of implementation.

“The GST Council will review online gaming revenue performance from October 1st, 2023, onwards,” the official revealed to Moneycontrol. “The Council’s earlier decision to impose a 28% tax likely stands, as GST collections from online gaming have increased 5-6 times in recent months. Supporting data will be presented to the Council.” This cold calculation ignores the catastrophic consequences for the industry.

Industry Plea For a Sustainable Tax Model

Industry stakeholders had planned to urgently approach the newly elected government after the general elections. They aim to obtain a lifeline by shifting the GST calculation from the full deposit value to the earlier Gross Gaming Revenue (GGR) model.

The Human Cost – Lost Jobs, Stifled Innovation

The policy change, implemented in the name of increased tax revenue, is having the opposite effect. Smaller startups have gone under, and layoffs have become a grim reality for surviving companies. The spirit of innovation that made India’s RMG sector a global player is fading under this unsustainable burden.

No Relief in Sight From GST Council

Compounding the industry’s woes, the issue of online gaming taxation won’t be assessed by the GST Council’s fitment committee (which includes revenue officials from both the central and state governments). Instead, it will go directly to the Council for review.

The Numbers Don’t Lie – A Tale of Two Realities

• Retrospective Tax Notices: ₹1.12 lakh Crores sought across the industry
• Pre-Oct 2023 GST: ₹200 Crores/month approx.
• Post-Oct 2023 GST: ₹1,100 Crores/month approx
• Oct-Dec 2023 Quarter GST: ₹3,470 Crores (over a fivefold jump)

A Dire Conclusion

The government trumpets a fivefold increase in revenue but ignores the long-term consequences. Industry leaders warn of a looming collapse that will wipe out jobs, stifle innovation, and undermine India’s reputation as a hub for tech-driven businesses.

“The online gaming industry may have to work on ways to increase its revenue through other business strategies,” the official concluded, offering little hope for change.

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Cover Image Courtesy: Economic Times