With the ascent of the gaming populace in India, a few changes have been proposed to direct the online gaming industry.

These changes incorporate the proposed draught gaming rules by the Ministry of Electronics and Information Technology (MEITY), which is appointed as the nodal ministry for online gaming, and a change to the ongoing tax collection framework for online gaming.

The Indian Gaming Industry, which comprises pay-to-play gaming, esports, and fantasy sports, requests that the government keep up with the ongoing current goods and services tax (GST) rate of 18% instead of raising it to 28% for online gaming.

Furthermore, the industry likewise demands that the GST simply be applied to the platform providers’ commissions instead of the total prize pool awarded to winners of esports competitions and pay-to-play gaming apps.

Rohit Agarwal, founder and director of Alpha Zegus, said, “We hope this does not come into effect, since it would immensely affect our growing industry.” We are currently on a gradually growing path of increasing in-app purchases related to gaming. Raising the slab to 28% “would set us back to square one,” according to Livemint.

The tax collection rate presented by the group of ministers (GoM) to the finance minister proposed an all-inclusive tax rate of 28% and wouldn’t differentiate between games of skill and chance.

The tax rate was to be discussed during the GST council meeting on December 17 but was postponed because of the lack of consensus on how to tax online gaming and clubs. As per Finance Minister Nirmala Sitharaman, the ministry will circulate the most recent GoM report to all states, and the matter will be examined thoroughly by all members in the following GST Council meeting.

While the industry favours a 28% tax on gross gaming revenue (GGR), the government plans to charge GST on the entire sum (entry amount). The industry claimed that increased tax rates might push people towards illegal offshore pay-to-earn websites.

Lakshmikumaran & Sridharan (LKS), an Indian law firm specializing in taxation, also said that the tax on GGR is the best policy for India moving forward in the gaming industry.

The Ministry of Information and Broadcasting additionally uncovered the suggestions made by the task force for the AVGC sector. AVGC task for the suggested establishment of a national AVGC-XR mission with a budget to further expand the AVGC industry in India.

In response to queries regarding budget expectations from G2G, Roland Landers, CEO of the All India Gaming Federation, said,

“AIGF is determined to implement the Hon’ble Prime Minister’s vision for the online gaming sector through the continued expansion and transformation of this industry in India. We have seen a lot of progressive regulatory moves recently in the context of online gaming, which has all been very welcome. “With the AVGC Task Force’s recommendations for a game development fund and the annual gaming expo, the recognition of the Ministry of Youth Affairs and Sports as the nodal ministry for eSports, and the draught IT rules for gaming intermediaries, the gaming industry is well positioned to be a torchbearer for Brand India.”

“Since the future of this industry is extremely positive, there is truly a lot for the gaming industry to look forward to.” A well-clarified and progressive taxation regime would boost this sunrise sector immensely. Such a move will make gaming a cornerstone of Digital India and be the catalyst for India to achieve its goal of a trillion-dollar digital economy.

Speaking on the topic, CEO and Founder of Witzeal Technologies, Ankur Singh, said, “MeitY recently published a draught of rules about online gaming for public consultation. It is encouraging to have the government supporting India’s burgeoning and promising online gaming industry flourish.

“We believe that government backing would provide the entire ecosystem with the much-needed boost it needs because the industry is creating opportunities for the start-up space, luring FDI, and boosting the national economy. The sector’s growth will be further boosted by strengthening the AVGC task force set up, which was established in the previous year’s budget. “We also expect the government to take into account the taxation aspect in the upcoming union budget, which would provide Indian businesses with a competitive edge and encourage them to meet international standards.”

“A profusion of job prospects can then be further tapped by rewarding innovation when a government body or an SRO is in charge of overseeing the entire industry.” In addition, we think that a robust digital infrastructure would facilitate the sector’s growth and adapt to new technologies, creating opportunities for gaming studios in India. This will also support the government’s “Make in India” and “Digital India” initiatives. “The government’s goal of creating a $5 trillion US economy is something that the online gaming industry wants to support,” Ankur added.

Sai Srinivas, co-founder and CEO of MPL, said, “2023 is already shaping up to be a watershed moment for the gaming industry.” With the government releasing draught online gaming rules earlier this month, the burgeoning sector will see a lot more success this year.

“In addition to this, the industry hopes to get clarity in a few areas.” The first is the GST mechanism for online gaming. We hope the government provides clarity on the tax slab applicable to skill gaming. Another relates to the AVGC fund set up as part of the AVGC Promotion Task Force announced in last year’s budget. “Access to financial support, as envisaged under this, will be a tremendous boost to young, talented developers and designers and will accelerate the push to “create in India” and take made-in-India games to the world.”

“We believe that India’s online gaming industry can truly lead the charge in the global digital economy, and we believe that a consistent, progressive policy can be the wind in its sails,” he added.

The co-founder of WinZO, Paavan Nanda, also shared his expectations, saying, “The online gaming industry has the potential to scale rapidly and become a significant contributor to the government’s vision of a trillion-dollar digital economy.” “The industry is currently in its nascent stage and needs stability and clarity from a tax and compliance perspective.”

“The proposed 28 percent GST on the gross gaming value of all games played, over the current 18 percent on the commission of the gaming companies, would have an existential impact on the segment.” Further, a reduction in the TDS threshold from the current winnings exceeding INR 10,000 could also impede the growth of the industry. “The TDS liability on winnings above $10,000 already stands at 30% under the Income Tax Act of 1961,” added Nanda.

“The increase in GST and TDS cumulatively would completely wipe out the homegrown industry that has the potential to be the largest next generation of exports of consumer tech products made in India for the world.” In this budget announcement, we are hoping to see a continuation of the current GST slab and TDS threshold, as a sharp increase in tax will deter growth, sink early-stage startups further into losses, and overall make the industry unviable. “A clear and supportive tax policy will not only generate revenues for the exchequer but will also create great value in the long run for the country and the gaming ecosystem,” he said further.

“In last year’s budget, the government recognized the gaming sector as one of the potential segments for job creation in India and set up the Animation, Visual Effects, Gaming, and Comics (AVGC) promotion task force to realize the potential of the segment. “We are hoping for the announcement of constructive action in that direction to give a boost to the gaming industry,” Nanda concluded.

Gaming firms and organizations are additionally requesting consistent tax policies, as many firms deal with issues because of muddled tax policies. For the sector’s legitimate operation, a very well-explained and moderately progressive taxation is expected.

Firms additionally requested lower import taxes to make necessary hardware accessible for the AVGC area to foster AAA-quality games in India and gaming equipment availability for gamers to upgrade and stay up-to-date with the latest gaming technologies.

Credit: Gateway to Gaming