Regulatory tech fear knock-on hit from gaming GST

Synopsis A 28% GST on gaming will push up operational costs for many platforms, which will be passed on to users. While this might not get people to move away from this sector fully, there is bound to be an impact on the amount of money being bet through these platforms, experts said. ETtech The recent GST Council decision to put gaming companies within the 28% tax bracket could have a knock-on impact on the larger fintech and the regulatory tech ecosystem.

Industry estimates suggest that around 5% of the overall volumes for the regulatory compliance and fintech industry could be coming from gaming applications that rope in fintechs to process pay-outs for gamers and regtech companies to undertake KYC (know your customer) of their users. Industry insiders said they are expecting around 25% impact on their revenue lines from the gaming sector due to higher GST. Impact on volumes A 28% GST on gaming will push up operational costs for many platforms, which will be passed on to users.

While this might not get people to move away from this sector fully, there is bound to be an impact on the amount of money being bet through these platforms, experts said. “The real impact will only be seen once the systems are put in place and there is more clarity, but as of now, we are preparing ourselves for anywhere between 10% to 25% of hit on our toplines,” said the founder of a startup that works with more than 20 gaming companies offering them KYC services. Discover the stories of your interest Blockchain 5 Stories Cyber-safety 7 Stories Fintech 9 Stories E-comm 9 Stories ML 8 Stories Edtech 6 Stories A top executive at a fintech firm, which works with multiple gaming applications, said there are many power users for these gaming apps.

These users are comparable to the high-frequency traders in stock markets. They typically bet large amounts and do it regularly. “We do not know what the share of these power users in this sector is.

If their share is more than 90%, then even 80% to 85% of the toplines could disappear, pushing them back into the grey market,” the executive said. “But this is still a conjecture. With time, all this will be proved.

” ETtech Getting in line Initially, gaming applications started using fintech services only when a user would try to liquidate his or her winnings from the app in the form of direct bank transfers. But eventually, as the industry came under intense scrutiny of the central government, they tried to make their processes more compliant. “Things became stricter when most of these apps started appearing on Google Play Store.

. . They had to build in safety features in the app after that,” said the founder of another fintech startup that offers checkout services to gaming apps.

Around 50% to 70% of the apps currently undertake checks on all their users. That would include age checks, identity checks, and, in some cases, they take a picture of the customer. They would also map bank accounts and follow KYC practices to authenticate if the user is genuine or not.

Currently, there are no strict KYC norms like in the case of mobile wallets or bank accounts, but typically these platforms do checks similar to a fintech lending platform, the fintech founder said. Thrown into uncertainty The gaming industry is in the process of establishing its own self-regulatory organisations to manage the affairs of the sector well. On July 14, it appealed to the Centre to relook at the decision of imposing 28% GST on the entire deposit value.

In a letter to the Ministry of Electronics and Information Technology (MeitY), the industry appealed to impose this tax on gross revenues only. In terms of volumes, industry estimates the number of annual KYC transactions at around 10 million. The founder quoted first in the story told ET that the volumes go through the roof during the Indian Premier League (IPL).

“Even last week, we saw a boost in volumes as India started its cricket series with the West Indies,” he said. These apps typically offer a closed prepaid wallet, which holds the money for users. Whatever they bet is held there and whatever they win gets deposited there too.

Now, if the user wants to withdraw his or her winnings, there is a payment gateway which gets used to transfer the spoils to the mapped bank accounts. If the usage of these apps goes down, it will eventually reduce the usage of these financial services, too. Don’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp.

click here! Monday, 17 Jul, 2023 Experience Your Economic Times Newspaper, The Digital Way! Read Complete Print Edition » Front Page Pure Politics ET Markets Smart Investing More Air India Writes off ₹7kcr in FY23, Turns Ebitdar +ve Tata-owned Air India wrote off an estimated ₹7,000 crore in FY23 as part of impairments stemming from the carrier’s faulty aircraft and engines as well as low-cost airline AirAsia India, people aware of the matter said. FAME Red Signal: Return Sops or face Legal Action The Centre will take legal action against electric vehicle (EV) makers that don’t refund incentives said to have been wrongfully claimed under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II scheme, a government official said. Personal Data of Indians in Public Domain may get Shielded from AI Generative artificial intelligence (AI) platforms such as ChatGPT or Google’s Bard may not be able to process the personal data of Indians available in the public domain, as per the latest draft of the Digital Personal Data Protection (DPDP) Bill, 2023, which was approved by the cabinet earlier this month.

Read More News on Online Gaming kyc gst council ministry of electronics and information technology Fintech premier Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox. .

. . more less ETPrime stories of the day Aviation Scary tail: Multiple incidents of IndiGo’s aft kissing the runway is an ominous sign.

Here’s why. 12 mins read People Can NSE veteran Sundararaman reinvent Sensex and reclaim BSE swagger? 13 mins read Investing How Rajeev Thakkar and EA Sundaram spotted ITC in 2019 and got their big value calls right 10 mins read Subscribe to ETPrime.