Real money gaming firms risk huge revenue loss by FY28 on GST levy: Report | Mint
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Business News/ Industry / Real money gaming firms risk huge revenue loss by FY28 on GST levy: Report
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Real money gaming firms risk huge revenue loss by FY28 on GST levy: Report

Industry estimates real gaming to generate ₹6,500-6,800 crore in direct taxes and ₹75,000-76,000 crore in indirect taxes for the exchequer during FY24-28

India has a gaming community of about 42.5 crore gamers, the second largest globally after China.Premium
India has a gaming community of about 42.5 crore gamers, the second largest globally after China.

NEW DELHI : India’s online gaming market is expected to grow to 33,243 crore by FY28, but the real money gaming (RMG) segment will be under pressure in the wake of the 28% GST levy on the industry, according to a new report.

Consulting company EY’s latest report titled ‘New Frontiers: Navigating the Evolving Landscape for Online Gaming in India’ said India has a gaming community of about 42.5 crore gamers, the second largest globally after China. The entire online gaming market, after growing at a 28% CAGR from FY20-23 to 16,428 crore, is projected to drop to a 15% CAGR till FY28.

The RMG sub-segment, a major contributor to the online gaming sector, accou-ted for 83% of the market share in FY23, with over 400 startups. But despite its dominance, the segment’s revenue share is expected to dip to 75.4% by FY28, due to recent GST amendments. Industry estimates this sub-segment to generate 6,500-6,800 crore in direct taxes and 75,000-76,000 crore in indirect taxes (GST) for the exchequer during FY24-28.

The government increased the tax rate on online gaming firms to 28% in September this year, a significant hike from the previous rate of 18% was implemented following a recommendation from the 51st GST Council meeting.

The decision was notified by the finance ministry’s revenue department via an amendment to Central Goods and Services Tax Act, 2017. This change had a substantial impact on the profitability of online gaming companies, potentially leading to higher costs for consumers and a slowdown in industry growth.

In FY23, RMG constituted 83% of the total online gaming market share, yielding 1,700 crore in GST. However, the industry believes with the revised GST rates and valuation methods, annual GST collections could soar by 113% CAGR from FY23 base to reach about 75,000-76,000 crore by FY28. The top 2-3 RMG companies reported an Ebitda margin at 10-30%, while others are on the road to profitability, it added.

The RMG sub-segment may be under pressure, while non-RMG and e-sports will flourish, it added. “The impact on the sector is going to be temporary because 42.5 crore gamers will become 53.8 crore in the coming years. About 22,000 crore worth of investment has also come into the sector. The regulation has brought clarity on taxable amounts and approval process for legitimate games, bringing positivity in the space given investors now have clear visibility," said Raghav Anan, partner and leader, digital, new media and convergence.

He said that from a player’s perspective, the TDS is on net winnings now which means that consumers can offset losses leading to more sustained growth for players gaming in the RMG segment.

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ABOUT THE AUTHOR
Varuni Khosla
Varuni Khosla is a journalist with close to 14 years of experience in writing business news stories for mainstream newspaper companies like Mint and The Economic Times. She reports and writes on luxury and lifestyle brands, hospitality and tourism news, the business of sports, the business of advertising and marketing and alcohol brands.
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Published: 05 Dec 2023, 12:15 PM IST
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