Kalaari to Tiger Global: Investors urge govt to reconsider 28% gaming tax

They stated that the decision will 'adversely impact prospective investments to the tune of at least $4 billion in the next 3-4 years'

30 domestic and foreign investors have asked the Indian government to reconsider the goods and services tax (GST) council's decision to impose a 28 per cent tax on the full face value of online games.

According to the letter addressed to Prime Minister Narendra Modi, seen by Business Standard, the investors said that the council's decision has "unintended consequence of equating the constitutionally protected legitimate online skill gaming industry with gambling, betting and other 'games of chance'".

"This (tax) will lead to write off of investments made and would hurt the investor confidence," the letter further said.

They also said that the decision will have a "deleterious impact" on the industry and is expected to result in the loss of over 50,000 high-skilled jobs and a further loss of livelihood opportunities for over one million Indian citizens who are indirectly associated with this industry.

"The industry also spends roughly $1 billion in advertisements, which would be completely wiped off, leading to a cascading adverse impact on the larger media and entertainment industry," they added.

The letter stated that the decision will "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". It is the first instance of direct lobbying by investors against the tax move.

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Moreover, they said that if GST is levied on every contest played every time at full face value will increase the GST burden by 1,100 per cent. The same money will get taxed repeatedly resulting in a scenario where over 50-70 per cent of every rupee will go towards GST, they said.

The 11 Indian signatories of the letter include names like Peak XV Partners, ChrysCapital, Kalaari Capital, Lumikai and Matrix Partners India.

The 19 foreign signatories include Tiger Global Management, Tribe Capital, Republic Capital and Telstra Ventures, among others.

Last week, over 100 gaming firms wrote a letter to the finance ministry with a similar request, saying the tax will be a hurdle for foreign investment and put $2.5 billion already invested in the sector at risk.

Also Read: May go back to GST council on online gaming regulatory framework: MoS IT