Bengaluru: Ahead of the upcoming GST Council meeting which will review the tax rate on online gaming, a report revealed that half of Indian online gaming companies surveyed saw a decline in their profits, and a majority reported their share of Goods and Service Tax outgo to be 50-100% of their revenues.
The survey was conducted by the US-India Strategic Partnership Forum (USISPF) in April-May 2024, wherein responses from 12 companies belonging to different stages of operations were taken in to consideration.
In terms of the share of GST in total revenue, three companies - less than four years old - had paid 100% of revenue while having negative net deposits
While five of the companies were able to record revenue growth since the implementation of GST on gaming, betting, gambling horse racing etc, on 1st October 2023, seven companies had either stagnant revenue or a reduction in top-line. For two companies, the fall in revenue was up to 50%.
Following the recommendation of the GST council, the centre had increased the GST rate on these activities to 28% of the total money deposited with any gaming or betting platform. Prior to this, it was 18%, levied on gross gaming revenue or platform fees.
The survey revealed that only two companies have been able to raise funding since January 2023 compared to the funding of $500,000 to $400 million till December 2022.
Decline in margins due to increase in GST, caused the surveyed companies to resort to no-hiring, layoffs or shutting operations altogether.
"Most companies have recommended to amend the GST valuation mechanism to a ‘net deposit’ model with certain companies recommending to reduce the total withdrawals (either winnings or otherwise) from the total deposits for GST purposes", said the report.