High GST wiping out margins of gaming firms: Head Digital Works CEO
The Centre’s move of levying a higher 28% goods and services tax (GST) on online gaming companies a year ago has taken away 20-25% margins of such firms, pushing them into losses, Head Digital Works founder and CEO Deepak Gullapalli told FE.
Before October last year, online gaming firms were paying an 18% GST on the platform fee, which is the commission they charge from the participants entering a game. The GST Council revised the rate on online gaming to 28% on full face value or deposits made by the participants to play games, effective October 1, 2023.
“Around 45% of our revenues are going towards GST payments,” Gullapalli said. “We are operating on negative margins and making loss currently, but it is not too much. Our revenues are going up as we have significantly invested in new customer acquisition over the last one year,” he said, adding that the GST issue, including the retrospective tax notices, have slowed down the industry.
Head Digital Works, an online skill-gaming platform, operates under the brand – A23. The company has over 70 million users across its real-money gaming verticals — Rummy and Poker.
The company is aiming to improve its margins to 15-20% over the next three-four quarters.
