How online gaming industry is countering the 28% GST impact
The online gaming industry is grappling with the effects of the 28% Goods and Services Tax (GST) implemented since October 1. To counteract the impact on net profitability, industry insiders are developing strategies to encourage players to keep their money on platforms for longer periods and alter user behavior over the next year, Moneycontrol reported.
GST rate revision from 18% to 28% affects EBITDA positivity
A source revealed to Moneycontrol that the increased GST rate is affecting companies' EBITDA (Earnings before interest, taxes, depreciation, and amortization) positivity. Over the next year, online gaming companies plan to change user behavior by encouraging longer deposits, which will help reduce tax incidence and improve EBITDA positivity.
Companies absorb higher GST, experiment with incentives
Another source informed Moneycontrol that companies are currently absorbing the higher GST without passing it on to players. To incentivize users to keep their money on platforms for extended periods, companies may offer bonuses or other rewards. Companies are already testing various operational methods, with the impact expected to be seen after a year.
Growth in online gaming industry expected at 25% per annum
Despite the increased GST, the online gaming industry's market size is projected to reach $2.5 billion in FY24 and grow by 25% in the next fiscal year. If companies can successfully change user behavior over the next year, this 25% growth is expected to continue. "If the experiment of industry to retain user deposits fails then there may be a slowdown in real money gaming. Else, the growth in the industry will continue at 25% per annum," the source said.
Incentivizing users while adhering to rules of fantasy sports
Federation of Indian Fantasy Sports (FIFS) Director General Joy Bhattacharjya told Moneycontrol that offering incentives to users is the best way to offset the dip in margins while ensuring innovation remains within fantasy sports' rules. Over the next year, the industry will optimize GST implications as they determine their long-term strategy for business costs and customer retention.
