Peak XV, Tiger Global, others urge PM Modi to review India’s online gaming tax
Reading Time: 2 minutesTiger Global, DST Global, Peak XV, Steadview Capital, and Kotak Private Equity are among global and Indian investors who have asked Prime Minister Narendra Modi to reconsider India’s recently announced taxation on online gaming, saying the ‘onerous tax regime’ will lead to a write-off of $2.5 billion and loss of 1 million direct and indirect jobs.
The Goods and Services Tax Council, which comprises top federal and state finance ministers, said earlier this month that it had agreed to levy of 28% at entry points on full face value for online gaming.
The GST Council’s decision has ‘unintended consequence of equating the constitutionally protected legitimate online skill gaming industry with gambling, betting and other ‘games of chance,” a group of 30 investors wrote in a letter to Narendra Modi, the Prime Minister of India, on Friday.
‘We invested in this sector with the vision to make India the gaming capital of the world, which would help in generating, among other things, high-skilled jobs, billions in foreign capital and make the country a net exporter of innovation in gaming and allied areas such as animation, artificial intelligence and visual effects,’ said the letter.
Online gaming is one of the fastest growing consumer internet businesses in India. Fantasy sports startups — including Dream Sports, backed by Tiger Global and Alpha Wave Global and valued at over $8 billion, and Sequoia India-backed Mobile Premier League — have altogether raised billions as a generation of internet users build a habit of making bets on real-world sporting events in hopes to make money. The Friday’s latter gives the online gaming startups in India an enterprise valuation of $20 billion.
The Friday letter follows over 125 companies warning New Delhi that the sector is facing existential crisis and could face massive loss of investments due to the decision by the Goods and Services Tax Council. Dream11, the top fantasy sports startup in India, projected an 80% drop in its EBITDA following the new rule, Indian news outlet Arc reported earlier.
‘The current GST proposal will set up the most onerous tax regime for the gaming sector globally, which will lead to a potential write-off of the $2.5 billion capital invested in this sector,’ the investors’ Friday letter said. ‘This will also adversely impact prospective investments to the tune of at least $4 billion in the next 3-4 years and hence the growth of the gaming sector in India.’
Ref: techcrunch
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