By Tanvi Mehta and Riddhima Talwani
NEW DELHI (Reuters) -India’s decision to impose a 28% tax on funds that online gaming companies collect from their customers will not need further consultation and an early review is unlikely, the country’s revenue secretary said on Wednesday.
The government’s decision, announced late on Tuesday, was met with dismay in the $1.5 billion industry, and shares of casino operator Delta Corp and other online gaming companies plunged in Wednesday’s trade.
Revenue Secretary Sanjay Malhotra told Reuters that there was no need to further consult the gaming industry and amendments to enable the tax will be brought in the monsoon session of parliament, which begins later this month.
“Unanimous, emphatic, equitable decision of GST Council on e-gaming. I am not the one to take this decision, but I don’t think there is any chance of a review so early,” said Malhotra.
Companies and investors plan to approach the government and the prime minister’s office to request a rethink, a source with knowledge of the matter told Reuters on condition of anonymity.
Although the government said the decision was not intended to hurt the sector, industry representatives have said it could sap their earnings and lead to a loss of customers, jobs and investors.
Investors in the sector include Tiger Global, Peak XV Partners (previously known as Sequoia Capital India) and TPG.
The new tax “will render the legitimate online gaming industry unviable, effectively driving consumers towards offshore and illegal platforms that pay no taxes,” Games24x7, one of India’s biggest online gaming firms backed by investors such as Tiger Global, wrote in a LinkedIn post.
This will also lead to thousands of job cuts, it said.
The tax is also a threat to more than a thousand Indian gaming startups, which have been profitable, and now face increased costs and reduced users.
“The bigger players might have more capital to burn to get through this phase, but unfortunately startups will not have that chance,” said Aaditya Shah, chief operating officer of IndiaPlays, a gaming startup.
He said there were about 1,182 realmoney gaming startups in India and estimated 95% would close in response to the tax.
Maharishi Chattopadhyay, an avid gamer and co-founder of artificial intelligence platform Beatfantasy said he would shift investment towards mutual funds and away from fantasy games.
“Knowing how much money I made in fantasy last year, to see this ending is going to be difficult to digest,” he said.
(Reporting by Tanvi Mehta, Nikunj Ohri and Riddhima Talwani, writing by M. Sriram, additional reporting by Shivangi Acharya, editing by Christina Fincher, Emelia Sithole-Matarise and Barbara Lewis)
