Tiger Global, Peak XV, Steadview Capital, other investors ask govt to reconsider 28% online gaming tax

As many as 30 foreign and domestic investors, including Tiger Global, Peak XV and Steadview Capital have asked the Indian government to reconsider the tax on online gaming. ChrysCapital, Kalaari Capital and Bennett, Coleman & Company are other signatories in the letter.

Earlier this month, a Group of Ministers (GoM) decided to impose 28 per cent GST on casinos, race courses, and online gaming. "Online gaming, horse racing and casinos will be taxed at 28 per cent (all three activities) and they will be taxed on full face value," said Nirmala Sitharaman at a press conference in New Delhi.

The investors group said in the letter that the tax burden will increase by 1,100 per cent and make the online real money skill gaming business model "unviable", as per a report in news agency Reuters.

Also read: India's gaming industry's GST conundrum: Here's what lies ahead

"This (tax) will lead to write off of investments made and would hurt the investor confidence," the group wrote in the letter, in the first instance of direct lobbying by foreign investors. Tiger Global and Peak XV have invested in Indian gaming companies such as Dream11 and Mobile Premier League.

This comes after over 100 online gaming companies and industry associations approached the Centre last week, urging it to reconsider the 28 per cent GST. They signed an open letter and asked the government to come up with a “viable and progressive GST regime”. 

Moreover, Bimal Jain, Chairman of the Indirect Tax Committee, PHDCCI said that a clear distinction should have been made between online games that are based on skill and games that are in the nature of betting, wagering and gambling. Jain said that a levy of 18 per cent would have been more reasonable as against a 28 per cent for protection and growth of the industry including start-ups. 

Also read: 'Will go back to GST Council...': MoS IT Rajeev Chandrasekhar on 28% tax on online gaming

Roma Priya, founder of Burgeon Law, a new-age legal firm that supports India’s start-up ecosystem, said that the imposition of 28 per cent without considering if the games require skill or are based on chance has eliminated the differentiation between games of skill and chance. “This goes against legal precedents and treats online skill gaming as equivalent to gambling…The vision of creating a progressive digital gaming ecosystem seems uncertain in light of this decision by the GST Council,” said Priya, adding that this will impede the growth of the gaming industry. 

US-based hedge fund Hedonova’s CIO, Suman Bannerjee, said that the decision to have a 28 per cent GST for online gaming will have a negative impact on the overall gaming industry. “Online gaming companies and gamers will get affected the most,” he said, further adding that it is a positive step as GST on gambling and horse racing should be as high as possible to deter the poor and the middle class as the costs of this indulgence is high. 

Also read: 28% GST on online gaming: Government unlikely to review decision

Also read: ‘Disappointed and distressed’: Industry players call 28% GST on e-gaming a major dampener