Gaming Startups Face Tough Times As Competition Heats Up
The coming months will be a test of survival for India”s online real-money gaming startups as the 28% Goods and Services Tax (GST) is set to take effect. With this significant tax hike looming, the USD2.9-billion gaming industry is bracing itself for a challenging period. Companies are now strategising to navigate these turbulent waters, with their eyes on April next year when the government plans to review the impact of the new tax rule.
The industry is already experiencing a shake-up as companies scramble to adapt to the impending tax increase. While the entire sector will be affected, it is the smaller and newer players that will bear the brunt of this financial burden. Industry experts anticipate that this could potentially lead to a consolidation in the gaming sector, with larger businesses gaining an advantage over their smaller counterparts.
The new GST regime comes at a critical juncture for gaming startups, adding yet another layer of complexity to their operations. As they strive to stay afloat and weather the storm until the government”s review in April, these startups will need to carefully navigate the challenges posed by the increased tax burden.
The new 28% GST rate on online gaming will disproportionately impact smaller startups, giving large businesses an edge. RBI”s liquidity-draining move has weighed on banking stocks, with HDFC Bank sliding the most. RBI”s imposition of an incremental cash reserve ratio will lead to the impounding of deposits that weighed on the banking stocks. Since the announcement, the Nifty Bank Index has shed nearly 2% as against Nifty 50″s 1.2% fall. HDFC Bank has slid 4% — the most among its banking index peers.
India”s online real-money gaming startups are facing a daunting test of survival with the impending 28% GST rate, which is set to impact smaller players in the industry, potentially leading to consolidation. The banking sector, like the HDFC Bank, has been affected by RBI”s liquidity-draining measures. As these sectors navigate their respective challenges, adaptability and strategic planning will be crucial for their continued success in the evolving business landscape. While the road ahead looks tough, these companies will need to innovate and adapt to ensure their survival in a rapidly changing regulatory landscape.
