Real money gaming startup Fantok has announced the suspension of its operations in response to the recent imposition of a 28% Goods and Services Tax (GST) on gaming startups. The regulatory landscape’s rapid changes in India have posed complex legal challenges for the real money gaming sector, prompting Fantok to reevaluate its future direction.
Challenges Faced by Fantok
Fantok shared in a LinkedIn post that the combination of the newly enforced 28% GST on total realized amounts, along with high Tax Deducted at Source (TDS) rates and issues concerning payment gateways, has exacerbated the challenges. Moreover, the substantial cost associated with customer conversion has strained the company’s resources considerably.
Temporary Suspension for Reassessment
Given these circumstances, Fantok has made the tough decision to temporarily suspend its operations. The company intends to pause operations. This pause aims to give the company time. The time is for exploring a strategic pivot. The pivot should align with the evolving regulatory environment. The pivot should also align with the company’s mission. The mission is about delivering meaningful experiences.
Fantok Background and Rapid Growth
In 2022, Ronak Ahuja, Prakhar Saxena, and Ashok Vishwakarma founded Fantok. It’s a Gurugram-based social gaming platform. Fantok specializes in real money binary prediction games. These games are hosted by social media creators. They’re integrated within short videos. Within three months of launching, Fantok achieved over 15,000 downloads. It also built a community of 130+ creators.
Industry-Wide Impact of GST Decision
Fantok is not alone in its struggle against the impact of the 28% GST decision. Other gaming startups have also faced significant consequences. Gaming unicorn Mobile Premier League (MPL) reduced its workforce by 350 employees, citing the substantial tax burden increase. Hike, a web3 gaming startup, cut 25% of its workforce, while online gaming platform Spartan Poker let go of 125 employees.
Last month, the GST Council’s decision to levy a 28% GST on online real-money gaming was met with heavy criticism from industry stakeholders. Numerous gaming startups, industry bodies, and investors voiced their concerns and called on the government to reconsider the decision. The Lok Sabha approved the amendments to GST laws to impose this tax on the full face value of bets for online gaming, casinos, and horse race clubs, with the implementation slated for October 1. Finance Minister Nirmala Sitharaman indicated that the levy’s impact would be reviewed six months after implementation.
