Companies Implement New Measures to Mitigate Tax Burden in Online Gaming
Companies that operate online games involving real money are implementing new strategies to discourage frequent player withdrawals. The goal is to mitigate the effects of an increased indirect tax burden and enhance their earnings. These measures are being put in place in response to the new Goods and Services Tax (GST) regime, which imposes a 28% GST on player deposits since October of last year.
One such platform, A23, is limiting user withdrawals to 15-20 per month. Once this limit is reached, players must wait until the next day to make another withdrawal. The reasoning behind these restrictions is to encourage players to keep funds in their accounts for longer periods of time, allowing the money to circulate for multiple games. This could potentially increase the commission income for companies.
Previously, companies earned around 10% of the wagered amount as commission on bets. However, under the new tax laws, companies face a more significant tax liability that is tied directly to player deposits. To avoid passing these increased costs onto players through higher commissions or taxes, companies are experimenting with different models. Fantasy sports platforms, for example, are adjusting the win percentages so that a certain minimum of players will at least win back their deposits. This manipulation of winnings and withdrawals is being explored as a way for companies to maintain profitability without alienating users.
These measures are particularly important during high engagement periods, such as the Indian Premier League season. Companies closely observe the effectiveness of these strategies, as they could dictate further adjustments across the online real-money gaming industry. As the industry adapts to the new taxation framework and strives to maintain profitability, these adjustments are being closely studied.
Analyst comment
Neutral news: Companies Implement New Measures to Mitigate Tax Burden in Online Gaming
As an analyst, it is expected that these new measures will help companies mitigate the effects of the increased tax burden and enhance their earnings. By limiting user withdrawals and manipulating win percentages, companies aim to keep funds in player accounts for longer periods of time, increasing commission income. The effectiveness of these strategies during high engagement periods will determine further adjustments in the industry as companies adapt to the new tax framework and strive for profitability.
