Ashneer Grover Warns of Consequences, 28 Percent GST on Online Games Threatens Foreign Investments
Double Standards or Regulatory Oversight? The Debate Over India's Online Gaming Tax
12 July 2023
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Kunal Tyagi
The introduction of a 28% GST on online games in India has sparked controversy and criticism from industry experts, entrepreneurs, and gaming enthusiasts.
Ashneer Grover, the co-founder of BharatPe, has voiced concerns about the impact of the high tax rate on foreign investments in the gaming industry and other startups, potentially damaging the overall investment climate in the country.
Grover has questioned the timing and double standards exhibited by the government, highlighting the endorsement of online gaming by cricketers and the acceptance of gaming platforms as sponsors by the BCCI. He suggests that the outrage against online gaming appears contradictory in light of these actions.
India's gaming industry has been hit with a major blow as the GST Council recently announced a 28% Goods and Services Tax (GST) on online games. This decision has sparked controversy and criticism from industry experts, entrepreneurs, and gaming enthusiasts alike. One prominent figure, Ashneer Grover, co-founder of BharatPe and former Shark Tank India judge, took to social media to express his disdain for the policymakers and the potential consequences of this tax. In this blog, we will delve into the implications of the 28% GST and the concerns raised by Grover and others.
Impact on Foreign Investments:
Grover argues that this high tax rate will discourage foreign investments not only in the online gaming industry but also in other startups across various sectors. He warns that the introduction of such a tax may lead foreign investors to apply a regulatory risk discount to India, drying up funds and hindering the growth potential of the startup ecosystem. Grover believes that this decision could have far-reaching effects, damaging the overall investment climate in the country.
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Questioning the Timing and Double Standards:
In his criticism, Grover raises questions about the timing and double standards exhibited by the government. He highlights how cricketers endorsing online gaming platforms went largely unopposed, and the Board of Control for Cricket in India (BCCI) even accepted Dream 11 as a title sponsor. Grover suggests that the outrage against online gaming seems contradictory when considering the involvement of cricket stars and the endorsement deals they have secured.
Tech Companies and Regulatory Risk:
Grover expresses his concerns about the future of Indian tech companies, stating that they may choose to base themselves in countries like Dubai or Singapore due to the perceived regulatory risk in India. This could lead to a drain of talent and potential economic opportunities. Grover asserts that the regulatory environment should be more favorable to encourage innovation and entrepreneurship instead of driving it away.
Criticism from Industry Associations:
Several industry associations, including the All India Gaming Federation (AIGF) and the E-Gaming Federation (EGF), have criticized the decision to impose a 28% GST on online gaming companies. They argue that this tax burden, which exceeds their revenues, will make the industry unviable and benefit black market operators over legitimate, tax-paying players. The negative market response to this decision is evident, with shares of gaming firms like Nazara Technologies, Onmobile Global, and Delta Corp experiencing significant declines.
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