VCs: GST-hit gaming companies, VCs in a huddle to keep the lights on


Venture capitalists and online gaming executives are huddled in boardrooms, brainstorming new strategies to pivot their business models and diversify outside India following the government’s decision to increase GST on online gaming platforms from this month.

Experts believe that this will force a major consolidation in the real-money gaming (RMG) industry in the near future, wherein 80% of the smaller companies will either shut down or get acquired by bigger rivals such as MPL, Dream11 and Games24x7.


Egaming company Winzo announced last week an investment of $25 million to enter the Brazilian market, which has a tax levy of 2%-3%, much lower than India’s 28%. Dream11 also acquired fantasy sports trading platform Sixer for an undisclosed sum last week. Gameskraft, one of the first companies to move the Supreme Court against the government’s tax notices, shut down its super-app Gamezy as part of its “restructuring”, it said.

Meanwhile, Gurugram-based DeltaTech Gaming, which was looking to raise Rs 550 crore through an initial share sale early this year, has stalled the plan and is now on a ‘wait-and-watch’ mode.

Online gaming in India is a $2.9 billion market, nearly 55% of which flows from the RMG segment, according to a report by Kalaari Capital. There are close to 520 million gamers in India, of which around 115 million pay and play. There are more than 700 e-gaming firms in the country which have, since 2017, collectively raised more than $3 billion from various sources, including venture capitalists.

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“Investors and founders are in a state of conundrum due to misalignment between various arms of the government on the issue,” said a top executive at a VC fund with active investments in gaming.

Also read | DGGI raises Rs 55,000-crore tax demand from Dream11, other online gaming companies

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“The government must come up with a self-regulatory body to differentiate among categories of gaming under the MeitY model so that the taxman can decide which activities they want to discourage,” said another executive.

The real-money gaming industry was rocked by the government’s decision to levy 28% goods and services tax (GST) on gaming deposits and 30% TDS (tax deducted at source) on winnings from October 1. These taxes have rattled the industry, and is likely to impact gaming influencers, platforms, and developers in the long run.

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