 "Gaming industry will shut down in India if...: Dream11 CEO Harsh Jain issues BIG warning, explains why")
synopsis
Dream11 CEO Harsh Jain warns that most gaming companies will shut down if the government pursues its Rs 1.1 lakh crore GST demand. He argues that the industry doesn't have the funds to meet the demand, which includes retroactive taxes, and calls for an independent regulator.
Harsh Jain, the co-founder and CEO of Dream11, the most valuable gaming company in the country, has stated that "the majority of companies will shut down" if the Centre persists in requiring its notice to recover over Rs 1.1 lakh crore in GST demands, including those that were slapped retroactively (stayed by the Supreme Court on January 10). Jain is seeking an independent statutory regulator like SEBI to oversee the affairs of the online gaming industry.
Dream11, which itself faces a Rs 28,000 crore GST demand, has said the over 400 gaming companies involved in the GST notices do not have more than Rs 10,000 crore with them to make up for the tax demand. "All of the significant financial figures you see for us relate to our valuations (during fund-raising events)." However, valuations are unable to pay taxes. If compelled to pay the tax demand, the entire industry would shut down," Jain told TOI.
In place of the previous 18% tax on business income, the GST Council levied a 28% tax on the entire face value of player collections on online real-money gaming platforms from October 1, 2023. In what made matters worse for the industry, the govt said that the tax will apply retrospectively, covering transactions from August 2017 to October 1, 2023. Jain, who had co-founded Dream11 in 2008 with Bhavit Sheth, says this demand is unviable and untenable.
Jain said while the new GST rates are leading to a windfall for the govt, the industry is in a shambles. Moreover, the revenue and profitability of even the larger companies has been hit very badly, with not many avenues to gain from. Jain also discussed offshore gambling organizations, claiming that many of them were operating illegally in the nation, evading taxes, and pushing betting instead of skill-based challenges.
Dream11 was last valued at $8 billion when it received money in 2021, and it became a unicorn in April 2019. Its financial figures, however, reflect the appraisals. Dream Sports, the parent company of Dream11, generated a total revenue of Rs 6,581 crore in fiscal year 2023, up 62% from Rs 4,065 crore, and profits of Rs 188 crore, up 32% from Rs 142 crore.
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