SUMMARY
Shares of Nazara Technologies slumped as much as 14% during the early trading on the BSE on Wednesday due to apprehensions about impact of the 28% GST rate on online gaming
Nazara said that the 28% GST would apply only on skill-based real-money gaming, which contributes just about 5% to its consolidated revenue
On Tuesday, the GST Council accepted the suggestion of the Group of Ministers to levy 28% GST on online gaming, horse racing and casinos
Shares of Nazara Technologies slumped as much as 14% during the early trading on the BSE on Wednesday (July 12), a day after the GST Council decided to levy 28% GST on online gaming on full face value.
However, the company said it expects the move to levy GST at the rate of 28% on online gaming to have minimal impact on its overall revenue.
“With reference to the GST Council’s decision to levy a 28% goods and services tax (GST) on online gaming, Nazara Technologies Limited would like to clarify that this tax, once implemented, will apply only to the skill-based real money gaming segment of our business,” the company said in an exchange filing.
Nazara said the skill-based real-money gaming contributes only 5.2% to its consolidated revenue and the company expects the move to have minimal impact on its revenue.
“To the extent required, the Company will proactively take steps to mitigate any potential impact to this segment of our business, and we anticipate minimal impact to our overall revenues,” it added.
Following this, the shares of the company recovered and were trading 3.6% lower at INR 680.80 on the BSE at 2:30 PM IST.
It must be noted that speaking at Inc42’s The Maker Summit earlier this year, Nazara CEO and joint MD Nitish Mittersain attributed the company’s conservative approach to the real-money gaming segment to the lack of clarity on regulations and taxation.
Commenting on the GST Council’s decision, Mittersain said on Twitter, “While the impact on Nazara will be minimal, we will continue to work closely with our peers and industry bodies to ensure best efforts are made to mitigate the headwinds faced by the sector.”
After several consultations and discussion on the issue, the GST Council, at its 50th meeting, decided to go ahead with the Group of Ministers’ (GoM’s) suggestion of levying a GST of 28% on online gaming, horse racing and casinos.
GST will now be applicable to gross revenue or total prize pool with no distinction between games of skill and games of chance. The government will also amend Schedule 3 of the GST Act to bring online gaming into the actionable claim list.
The online gaming industry strongly criticised the move, saying it would “destroy a significant portion of the successful companies” in India’s startup ecosystem.
