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Published: July 13, 2023
Updated: July 13, 2023

Impact of 28% GST Rate on Online Gaming: Nazara Tech Shares Show Resilience, While Delta Corp Stock Plummets

The imposition of a 28% Goods and Services Tax (GST) rate on online gaming in India has sparked a bearish reaction in the stock market. Both Nazara Technologies and Delta Corp witnessed declines in their share prices, although the extent of the impact differed significantly. While Nazara Tech shares showed limited losses, Delta Corp's stock dropped nearly 30%. This article explores the reasons behind the divergent performance of these companies and analyses the potential consequences of the new GST rate on the online gaming industry.

Nazara Tech: Minimal Impact Expected:

Nazara Technologies, backed by Rekha Jhunjhunwala, experienced a relatively limited fall in its share price. The company expects the 28% GST rate to affect only its skill-based real money gaming segment, which accounts for 5.2% of its overall consolidated revenues for FY23. In a regulatory filing, Nazara clarified that it would proactively take steps to mitigate any potential impact on this segment and anticipated minimal overall revenue impact. These reassurances provided comfort to investors, leading to a relatively smaller decline in Nazara Tech shares.

Delta Corp: Heavier Dependence on Gaming and Casinos

In contrast to Nazara Tech, Delta Corp's business heavily revolves around gaming and casinos. The Mumbai-based company's stock suffered a significant drop, indicating the greater vulnerability of companies primarily engaged in gaming activities. Delta Corp has not made any official statements regarding the impact of the 28% GST rate on its business, which further adds to investor concerns. With a decline of nearly 30%, the company's stock reflects the market's apprehension about the potential effects of the new tax rate.

Consequences of the 28% GST Rate:

The 28% GST rate on online gaming is viewed as a setback for Indian players, as it may result in increased contributions toward prize money. Experts believe that the higher tax rate could lead to players needing to bet larger amounts to maintain prize pools, potentially deterring participation. Additionally, the gaming industry may face challenges such as higher production costs, decreased consumer affordability, and reduced competitiveness. The increased tax rate could impact both game developers and consumers, potentially hindering growth and innovation in the industry.

Move to have disastrous impacts on gaming sector

The imposition of a 28% GST rate on online gaming in India has had varying impacts on companies in the sector. While Nazara Tech shares showed resilience due to their limited exposure to the tax rate, Delta Corp's stock plummeted significantly, reflecting its heavy reliance on gaming and casinos. The new tax rate is expected to have adverse effects on the gaming industry as a whole, including increased production costs, decreased consumer affordability, and reduced competitiveness. The future performance of these companies will depend on their ability to adapt to the changing regulatory landscape and find ways to mitigate the impact of the higher tax rate.