The proposed change in tax slab (18% to 28% GST) and retrospective tax imposition from the year 2017 has come as a double whammy for the real money gaming (RMG) platforms as their users have started flocking out of the games even as the rules are yet to be enforced.  

Leading RMG players have witnessed a sharp decline in their users’ traffic, ranging from 30-70 per cent, even as the tax burden is yet to come into force, industry insiders say. Drop in user engagement has left the firms high and dry in terms of revenue. 

“The 28 per cent GST has a direct impact on our traffic. We can already see a drop of 50 per cent from normal,” says Gaurav Gaggar, Promoter of Poker High.

Such is the impact that startups like Quizy had to shut their shutters. Top brands, which have been associated with premium media properties, are tight-lipped over the drop in user traffic, but their massive layoffs indicate all is not well with them. MPL, for instance, has laid off 50 per cent of its workforce, media reports say. 

The new rules mandate users to pay Rs 28 per every Rs 100 spent on an online game. The tax would be imposed without making any differentiation based on if the games require skill or are based on chance. Along with this, the user will be made to pay the platform fee and bear 30 per cent TDS on net winnings.

Earlier, online gamers and poker players did not have any additional impact of GST on the value of bets placed by them, except for the platform fee collected by the online gaming company, till now.

A senior industry expert said, “The smaller brands have faced the brunt more than the established ones. In the long run, the move will benefit top players as smaller/new players will be out of the race or lose steam due to monetary pressures.” 

Online gaming is one of the fastest growing consumer internet businesses in India. As per a dentsu report released last December, the number of Indian gamers was expanding at a compounded annual growth rate (CAGR) of 12% and is expected to jump to 700 million in FY25 compared with 507 million in 2021. The real money gaming ecosystem accounts for 3/4 of the total gaming sector revenue of INR 13,500 Cr as per a FICCI-EY report.

Over 80 per cent gamers are categorized as “casual gamers” who spend small amounts such as Rs 100 or Rs 200 per game. They account for 50 per cent of the Rs 2,000 crore annual GST paid by the online gaming sector, the gaming associations say. Now, brands seek to retain high value players who spend Rs 1,000 or more, insiders claim. 

Tejveer Bhamb, Executive - Digital Planning, Carat India, opines, “Gaming firms might have to struggle to retain gamers which would impact their marketing strategy, especially those at the nascent stage of establishing their name in the market. These newly established firms also might have to look for investments to raise funds so that they can possibly increase the Customer Acquisition costs and also to match the rise in the tax bracket.”

Uncertainty looms large

The ambiguity on the calculation of the GST still remains as platforms need to understand how this GST will be actually calculated, accordingly they will need to reassess and see whether it remains a viable business or not, gaming companies say.

There is a possibility of pivoting from cash games to tournament models but we need to see the impact on this as well. Marketing strategy will have to be changed accordingly, Gaggar adds. 

Illegal sites to benefit?

Industry associations and companies have been arguing that a 28 per cent GST move will not only restrict cash flow, but also diminish players’ motivation to participate on legitimate sites, driving them towards illegal offshore betting companies.

Our fear is that a lot of traffic may migrate to illegal sites and the so-called golden goose will be killed, said Gaurav Gaggar. 

"The GST move will not only bring the industry to the ground but will also push the players to unrecognized non-tax-compliant-offshore online platforms that could result in causing huge losses to the exchequer", says Shivanandan Pare, Executive Director and Chief Executive Officer – Deltatech Gaming.

Some firms are hopeful of better days. “We haven't changed our marketing strategies due to the recent developments. More focus on marketing and advertising is required to gain better attention from the audience. We shall wait to see if there is any substantial impact on this before we take any decisions otherwise," says Sarah Gomez, Head of Marketing, BetDaily.