The Indian online gaming industry is at a critical juncture, with Dream11 co-founder and CEO raising concerns over the government's retrospective GST demands exceeding ₹1.1 lakh crore. He warned that if the Centre continues to insist on the tax recovery, most companies in the sector will shut down.
Dream11, India's most valuable gaming company, itself faces a ₹28,000 crore GST demand and argues that the over 400 gaming firms affected do not collectively have more than ₹10,000 crore to meet the tax obligations. "All the big financial numbers you see are based on valuations during fundraising rounds, but valuations can't pay taxes. The entire industry will collapse if forced to comply with these demands," he told.
28% GST and Its Impact on Online Gaming
The GST Council's decision on October 1, 2023, to impose 28% tax on the full face value of player deposits-instead of the previous 18% tax on company revenues-has dealt a severe blow to the industry. Making matters worse, the government's decision to apply GST retrospectively from August 2017 to October 2023 has resulted in massive tax liabilities for gaming companies.
Dream11, which became a unicorn in 2019 and was last valued at $8 billion in 2021, reported ₹6,581 crore revenue in FY23 with ₹188 crore in profits. However, auditors noted that the GST demands create "material uncertainty", raising doubts about its ability to continue as a going concern.
Industry Revenue Drops, Government Collections Soar
The new GST regime has had a devastating impact on the gaming industry:
GST collections surged from ₹3,000 crore (before the rate hike) to ₹16,000-17,000 crore.
- Gaming industry revenues fell by 30-40%.
- Profits declined by 60-70%, even among top players.
- Venture capital funding dried up, forcing multiple companies to shut down.
The Dream11 CEO emphasized that while top 10 companies-accounting for 90% of the sector's tax payments-remain operational, their profitability has declined by 60-70%.
Call for a SEBI-Like Regulator for Gaming
Comparing the need for gaming regulation with the securities market's transformation under SEBI, the Dream11 CEO urged the government to create an independent statutory regulator for gaming.
"In any industry, bad actors will exist until a regulator steps in. We need clear regulations for gaming, and we've been waiting for nearly two years. We hope the IT Ministry takes this up soon," he said.
Offshore Gaming Companies Evading Taxes
He also raised concerns about offshore gaming companies operating in India illegally, evading taxes, and promoting betting over skill-based gaming. These entities, he claimed, are bypassing Indian tax laws, creating an uneven playing field for domestic operators.
Industry's Appeal: Tax Gross Gaming Revenue, Not Player Deposits
To ensure industry survival, he urged the GST Council to reconsider its stance and tax platforms based on Gross Gaming Revenue (GGR)-a globally accepted model-rather than levying GST on total player deposits.
As India's booming online gaming industry grapples with uncertainty, stakeholders hope that the government will adopt a balanced regulatory approach that fosters growth while ensuring fair taxation and compliance.
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