Now 28% GST on online gaming, casino and horse racing: Here’s the silver lining

If you are an online game provider, a fantasy sports platform, or an online casino based out of India, this blog is for you. In the first week of August, the Indian Government imposed a 28% Goods and Services Tax (GST) on the entry fee for casino, online gaming, and horse racing. According to Business Standard, it is basically a 28% tax on teh full face value of bets in the above mentioned games.

This does come as a major blow to the online gaming industry in India that already has a fair share of struggles in terms of legalizing of gambling and other challenges. However, who will be the most affected? That will change the game for many players in this industry. Let us analyze that.

The Most Affected Companies from Indian GST

The small to medium-sized gaming operators are possibly going to be most affected by the 28% tax. There are a few negative implications of this tax, such as -

  • New small and medium sized gaming operators will be discouraged to launch their platforms

  • Additional costs will ultimately be paid by the end-users who may be discouraged to play affecting operators’ revenues

  • Lower profit margins plus decreasing number of online gamers will eventually affect operators’ profits

In addition, there’s another challenge. The most affected would be the operators offering games with small pools. Games such as Ludo, Poker or Rummy have small player pools like four to eight players. As a result, the entry fee with GST will levy an increased share of money from each player while the overall earnings of the operator would still be the entry fee from four to eight players.

So while the GST is directly levied on the end user, the operator needs to pay the winner’s shares for the first and second winner from the prize pool while the winner needs to pay the TDS. As a result, the users will not get a great ROI in terms of investing the money compared to their earnings.

In short, the risk v/s reward ratio is further reduced for the players which will significantly reduce their participation.

The Silver Lining

Games with higher player pools such as fantasy football, fantasy cricket or any kind of fantasy games that are based on real-time sports and more than 90,000 to 100,000 players is a win-win for both the operators as well as the gamers. That’s because in large pools, the amount of entry fee is relatively small. Even when 28% GST is levied on the entry fee, the pool amount could go up to as much as INR 50,00,000/- (assuming entry fee of Rs 50+28% GST) making it lucrative for both players and operators.

While the new 28% tax imposition will definitely reduce the profit percentage to some extent, it won’t overall affect the fantasy sports industry. Online gaming operators, who have been offering small player pool games, have the option of switching to large player pool models and still benefit from their online gaming business experience.

When it comes to fantasy sports, Indian gamers are exploring all kinds of options. The Indian fantasy sports is not only limited to fantasy cricket anymore. Gamers are exploring fantasy football, fantasy basketball, fantasy kabaddi etc. There’s substantial margins in most of these games with large player pools, giving considerable revenue options for both players as well as operators.

What are your thoughts? Do you think 28% GST will prevent gamers from participating in online games and casinos? Comment below.

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