28% GST on online gaming to severely impact fintech and regulatory tech industries’ revenues

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While the 28% GST rate on full face value amount has dealt a heavy blow to the online real-money gaming industry the knock-on effect is also likely to be seen on the fintech and regulatory tech industries which provide payment processing and KYC services respectively.

According to some experts the new tax policy will increase operation costs for real money gaming firms which will be transferred to the users. While it is not enough to completely destroy the player base, it will have a high impact on revenue.

As a result, some insiders believe that 25% of the fintech and regulatory tech industry’s revenue, which comes from the gaming industry, will be impacted. The latter contributes to 5% of the total volume of those industries.

“The real impact will only be seen once the systems are put in place and there is more clarity, but as of now, we are preparing ourselves for anywhere between 10% to 25% of hit on our toplines,” one of the stakeholders said as per The Economic Times.

Another executive from a fintech firm said that there are a lot of big spenders on these platforms. Companies believe that with the 28% GST rate, the apps might lose these users.

The GST Council’s decision came as a shock to the online gaming industry as they had started complying with even strict policies from the government and Google when they allowed real money games on the Play Store. These generally included an identity check through KYCs to make sure the user is of legal age.

Furthermore, the announcement by MeitY about self-regulation and the performance of the real money gaming sector during IPL 2023 created a sense of hope and expectation that the government would take a favorable decision.

But now all the online real money gaming companies are uncertain about their future. A draft amendment to the GST law has already been shared by the government with all the states and is expected to be introduced in the monsoon session of the Parliament.

The companies have asked for a reconsideration of the decision but are not sure if their pleas will be fruitful. Whatever the outcome the sector is expected to see a number of developments on all the fronts in the short term.

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