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Online real money gaming firms are pivoting their business models and diversifying outside India after the government’s decision to levy 28 per cent GST on online gaming platforms from October. 1
The stakeholders and experts see consolidation with smaller companies either shutting down or getting acquired in the sector due to the decision. On October 5, real money gaming company Winzo announced an investment of $25 million to enter the Brazilian market, which has a tax levy of 2-5 per cent, much lower than 28 per cent GST on money invested in gaming deposits.
“WinZO’s expansion into Brazil will enable our 100+ partner game developers export games while gaining access to the Brazilian market. This expansion is particularly timely in the context of challenges faced by India’s gaming ecosystem due to a 400 per cent increase in the GST. Surely, stable revenue growth from export will help WinZO and all partner games compensate for the impact on unit economies due to the change in GST,” said Paavan Nanda, co-founder, WinZO.
fresh revenue stream
He added that the expansion will open up a fresh revenue stream for the company and allow the firm to build a unit economics positive franchise in the Brazil market, and shall have a significant contribution to the business in coming years. Winzo is not alone in trying to try newer growth models.
Gaming unicorn Dream 11 has acquired fantasy sports trading platform Sixer for an undisclosed amount to scale their offerings. Gameskraft, which has moved Supreme Court against the government’s tax notices, shut down its super-app Gamezy as part of restructuring.
“Companies are now exploring tax-favorable regions like the UK, Australia, Malaysia, Poland, Portugal, and Germany. However, the GST amendment could notably reduce India’s current 120 million gamer count, prompting industry consolidation and acquihire opportunities. Despite international expansions, the domestic tax liabilities persist, emphasising the need for a balanced tax framework collaboratively developed by the government and industry stakeholders to safeguard the sector’s sustainability and growth in India,” said Anirudh A Damani, Director, Artha India Ventures.
Industry body All India Gaming Federation however is cautious and said that it is too early to understand the impact of pivioting business model.
The online skill gaming sector with a $20 billion enterprise valuation, $2.5 billion in revenue, and $1 billion in annual taxes, is set to grow by 30 per cent CAGR to reach $5 billion in revenue by 2025, according to industry estimates.
India’s gaming industry attracted $575 million in investments between 2014 and 2020. However, in 2021 and Q1 of 2022 alone, $1.7 billion was invested in the online skill gaming sector.
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