 "Rajan Navani Founder and CEO, JetSynthesys")
E-sports experts say the burgeoning sector will not be affected by the Goods and Services Tax (GST) Council’s recent decision to levy a blanket 28 per cent tax on online gaming, which is being viewed by the industry as a death blow to gaming companies.
Since e-sport has now been officially recognised by the government and does not involve wagering or betting of any kind, the new GST would not be applicable to the industry, they say.
Indian e-sports firms told Business Standard that the GST Council’s decision had not disrupted their business, and they do not expect any long-term implications either.
In contrast, soon after the new tax was announced, the shares of listed companies like soonicorn (soon-to-be-unicorn) Nazara Technologies and Delta Corp, a gaming and hospitality firm that owns and operates casinos, took a tumble on the BSE, while smaller entities are expected to be the worst-hit, Business Standard had reported earlier.
“It is imperative to first understand that the 28 per cent GST is going to be applicable to the iGaming sector, including real money gaming (RMG), fantasy sports, teen patti, rummy and poker, which are categorised under gambling or betting in the rest of the world,” said Vinod Tiwari, president of Esports Federation of India (ESFI) and acting director general of Olympic Council of Asia.
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The GST, he added, was neither applicable nor would it have any impact on “video games” or the e-sports industry.
E-sports, or electronic sports, refer to competitive video gaming between professional players. The number of e-sports players across all competitive games in India increased from 600,000 in 2021 to 1 million in 2022, and is expected to reach 2.5 million in 2023, according to a recent report by FICCI-EY.
“Participation in e-sports does not necessitate an entry fee from players. The prize pools in e-sports tournaments are usually sponsored by brands. Thus, GST is not applicable as there is no wagering involved,” explained Rajan Navani, founder and CEO of gaming intermediary JetSynthesys.
JetSynthesys has a 90 per cent market share in the Indian e-sports sector through investments in companies like Nodwin Gaming and via subsidiaries like Skyesports.
Navani stressed that the video gaming and e-sports industry was more geared towards entertainment and not financial gains, which further separated it from iGaming.
In line with this, companies operating in the sector have not witnessed any aftershocks of the new GST announcement.
“For Skyesports, an organisation involved in e-sports, there will be no immediate or long-term impact as we will continue to pay taxes according to the taxation laws that apply to us,” said Shiva Nandy, founder and CEO, Skyesports, a Chennai-based firm known for hosting major esports tournaments.
Likewise, Sagar Nair, co-founder and CEO, Qlan, a social networking platform dedicated to gaming and e-sports, said that the company had not experienced any disruption.
“The Indian government has officially recognised e-sport as a sport, distinguishing it from iGaming, betting, gambling and similar activities categorised as gambling or betting in other parts of the world. Since Qlan operates in the gaming and e-sports space, it will not be impacted by this GST decision,” he said.
Sidharth Kedia, CEO of Nodwin Gaming, concurred, saying that their company fell outside the scope of the new tax system. “Nodwin Gaming does not impose any fees on e-sports organisations or players to participate in its tournaments,” he said.
The business model of Nodwin, he said, was anchored on brand sponsorships and media revenue. “We are already paying GST on all our revenue streams like any media company in India.”
What further separates e-sports from iGaming is government recognition. In December 2022, e-sport was declared a part of multi-sports events and put under the purview of the Ministry of Youth Affairs and Sports. It will also debut as an official medal sport at the upcoming 19th Asian Games.
“Categorising e-sport as a sport instead of iGaming has far-reaching benefits, from increased legitimacy and recognition to enhanced industry growth, talent development and international opportunities,” added Nair.
