Passion Gaming Co-Founders Reclaim Majority Stake Amid GST Concerns

In a significant development, the co-founders of Passion Gaming, Bobby Garg and Priya Kumar, have successfully reclaimed control of their company from Rank Group. This move comes amidst the backdrop of ongoing debates regarding the Goods and Services Tax (GST) applied to the online gambling and skill gaming sector in India.

Back in 2017, Stride Investments had acquired a 51% stake in Passion Gaming for $5.0 million (£3.9 million/€4.6 million), a move that was seen as a strategic expansion into the burgeoning Indian market. When Rank Group acquired Stride in October 2019, it took on this stake in Passion Gaming. Fast forward to the present, and Garg and Kumar have decided to buy back the holding, although the financial terms of this repurchase have not been publicly disclosed.

Rank Group had disclosed its intention to sell its stake in Passion Gaming while announcing its Q1 results in April. However, the identity of the buyer was not revealed at that time. Passion Gaming, known for operating the popular site, boasts over 10 million registered users. The initial partnership with Stride had been envisioned as a pathway to take full control of the business within three to five years. However, reclaiming full ownership earlier allows Passion Gaming to align more closely with its vision, according to co-founder Priya Kumar. “Acquiring full ownership allows us to pursue our vision with full autonomy,” she remarked.

Bobby Garg, the other co-founder, expressed optimism about the future of skill gaming in India. “We hold an optimistic view of the future for skill gaming in India,” he said. Garg also touched on the challenges of navigating complex taxation frameworks and expressed hope for a favorable regulatory environment. “We aim to reach 10 crore (100 million) registered users on RummyPassion over the next three years to establish a significant leadership role in the rummy market,” he added.

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Passion Gaming has been one of the many online skill gaming businesses recently grappling with substantial tax burdens following the Indian government’s decision to apply the GST to online gambling. Last July, the GST Council imposed a hefty 28% tax on the face value of bets, leading to significant financial liabilities for operators active in India. Passion Gaming, in particular, claims to be the only operator to have received a strict demand order from the GST Council.

Facing this tax demand, Passion Gaming challenged the order in the Punjab and Haryana High Court, resulting in a temporary pause in judicial proceedings. The overall tax burden across 71 affected operators, including Passion Gaming, totals a staggering INR1.2 lakh crores (£112.25 billion/€132.82 billion/$143.72 billion).

The co-founders of Passion Gaming continue to advocate for changes to the current tax policy, suggesting that the tax should be applied to gross revenue rather than turnover. “We hope the government seizes this opportunity to put India in the pole position globally in the gaming sector by fostering entrepreneurship in skill gaming and implementing fair taxation policies,” Garg emphasized.

Additionally, Garg expressed confidence in the progressive nature of the current government, which he believes is capable of making distinctions between permissible skill games and illegal gambling and betting activities. “We’re optimistic that with our continued commitment to player protection, the skill gaming sector can prosper. We keep our faith in the present progressive government, which can regulate skill gaming to differentiate it from betting and gambling,” he concluded.

Despite these serious challenges, the GST Council did not address the tax issues related to gambling in its June meeting, leaving the matter to be potentially discussed in the upcoming August session. International operators like Super Group have already withdrawn from the Indian market due to the burdensome tax demands, but Indian operators like Passion Gaming continue to hold out hope for a more fair and supportive regulatory framework that could allow the skill gaming sector to thrive.

As the GST Council prepares for its next meeting, the industry is watching closely, hopeful for changes that could significantly impact the future landscape of online skill gaming in India. Until then, Passion Gaming, under its reinstated leadership, aims to navigate these challenges while striving for growth and innovation in the competitive market.