RMG companies evolve new strategy to reduce 28% GST impact

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Online gaming companies, specializing in platforms like poker, rummy, and fantasy sports, are implementing strategies amidst the evolving landscape of taxation. In response to the surge in indirect taxes, these companies are devising new approaches to retain user funds within their ecosystems, ultimately aiming to bolster their revenue streams.

As reported by The Economic Times, to navigate the intricate tax structures, gaming firms are implementing measures such as limiting the frequency of withdrawals, particularly in shorter-duration games like rummy and poker. By curbing withdrawal options, these platforms aim to mitigate the impact of repetitive taxation, as each deposit incurs a GST charge. Additionally, for fantasy sports, where engagement spans over longer periods with a substantial user base, adjustments in win percentages are being explored.

Previously, Users habitually opted for daily withdrawals of winnings. However, platforms are gradually imposing restrictions on this practice. For instance, companies like A23 now restrict daily withdrawals to a set limit, discouraging excessive withdrawal behaviors. Some platforms have even enforced withdrawal limitations during peak traffic periods to manage user transactions effectively.

Industry insiders reveal that these measures are devised to capitalize on prolonged user engagement within the platforms. By encouraging users to retain funds and participate in multiple games, companies can potentially increase their commission earnings. Moreover, by reducing the frequency of withdrawals, these platforms aim to alleviate the burden of repetitive taxation on deposits, thereby safeguarding their profitability. The introduction of a 28% GST on deposits has necessitated a recalibration of revenue models within the real-money gaming sector. Previously, taxes were levied on earnings generated from user wagers. However, under the new regime, taxes are imposed on user deposits, prompting companies to rethink their operational strategies.

In response to these regulatory changes, platforms are reframing their product-market fit strategies to align with user preferences. While increasing commissions or passing on tax burdens directly to users might alienate them, adjusting withdrawal policies offers a more subtle approach to adapt to the new tax landscape.

Meanwhile, fantasy gaming platforms are also exploring adjustments in minimum winnings brackets to offset revenue declines caused by higher GST rates. These alterations, even though subtle, have the potential to significantly impact revenue streams, particularly in large-scale gaming formats.

As the industry braces for further regulatory shifts, gaming companies anticipate conducting more experiments in the coming months. With profitability metrics undergoing a reset, these initiatives underscore the sector’s resilience and adaptability amidst evolving tax dynamics.

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