Government of India slaps online gaming industry with new tax

A 28% tax has been imposed on online gaming companies’ earnings; sports betting sector has also been hit.

Original story by Nikunj Ohri for Reuters

India’s government on Tuesday said it would impose a 28% tax on funds that online gaming companies collect from their customers, in a blow to the $1.5 billion industry that has surged in popularity and attracted foreign investment.

Finance Minister Nirmala Sitharaman said the decision to impose tax on the total amounts gaming companies collect was taken after consultation with states, and the intent was not to hurt the industry.

But industry representatives said it would sap their earnings and the extra charges were likely to be passed on to customers.

“The implementation of a 28% tax rate will bring significant challenges to the gaming industry. This higher tax burden will impact companies’ cash flows,” Aaditya Shah, chief operating officer at the gaming app IndiaPlays, said.

India is viewed as an emerging online gaming center in Asia. 

Gaming association The All India Gaming Federation has called the imposition unconstitutional and irrational.

The gaming apps are endorsed by sporting heroes in India, where cricket is a national passion, but concerns have mounted over possible addiction and financial losses.

The apps have also attracted big investors.

Dream11, which is the lead sponsor of India’s national cricket team and is valued at $8 billion, is backed by Tiger Global. Peax XV – previously Sequoia Capital India – has invested in MPL app.

As a major Cricket country, India’s sports betting sector on the sport has likewise been affected.

Read the full report by Reuters here, to learn more about the implications on Cricket; with additional reporting by Sudipto Ganguly; writing by Aditya Kalra and Aftab Ahmed Editing by Mark Potter, Jane Merriman and Barbara Lewis