THE SURVIVAL PLAY OF REAL-MONEY GAMING COS

After the GST amendments, online gaming companies will struggle to retain gamers. The industry will consolidate

- Madhurima Nandy & Shouvik Das

On LinkedIn, the professional networking site, Sachin Yadav describes himself as “a passionate entrepreneur, driven by a relentless pursuit of innovation, growth, and success." Three years ago, he co-founded Quizy in Gurugram, a real-money-based gaming company. In such games, users play to win money. Quizy raised venture money from 100X, a venture capital firm that invests in early-stage startups. The company claimed it had scaled to over a million users. But earlier this week, Yadav announced that he was shutting down Quizy.

“Recent developments in the tax landscape and regulatory environment have left us with no choice but to bid farewell to our beloved gaming venture," Yadav posted on LinkedIn. He mentioned the changes around tax deducted at source (TDS) as a hit the company took.

Earlier, 30% TDS was deducted on online game winnings that exceeded the threshold of ₹10,000. But from 1 April, after changes were made to the Income Tax Act, a 30% TDS now applies on net winnings from online games in a financial year. Withdrawal of net winnings get taxed at source either when it crosses ₹100 or at the financial year end.

“This sudden change substantially impacted player earnings and motivation, leading to a decline in user engagement and loyalty," Yadav wrote.

From 1 October, real-money gaming companies, those who offer games like fantasy cricket and rummy, would have to brace for yet another regulatory disruption. Yadav wrote that this would “further compound our woes".

A 28% GST will have to be paid on the full value of amounts deposited by players for betting on online games, casinos, and horse races. However, redeployed winnings will be excluded from the indirect taxation.

How will this impact player motivation? Consider this: