From relaxation in taxation to a boost for start-ups in gaming; AVGC sector draws up its wishlist for Budget 2023 | The Financial Express

From relaxation in taxation to a boost for start-ups in gaming; AVGC sector draws up its wishlist for Budget 2023

Recent governmental reforms which include the appointment of MeitY as the nodal body for regulating online gaming and MYAS to regulate esports

Industry players from the AVGC sector look forward to the Union Budget for clarifications and regulations in the industry
Industry players from the AVGC sector look forward to the Union Budget for clarifications and regulations in the industry

The Union Budget, which will be presented by finance minister Nirmala Sitharaman on February 1, 2023, is around the corner and the animation, visual effects, gaming, and comic (AVGC) sector expects further plans for growth and development. According to industry experts, the Union Budget 2022-23 had a positive impact on gaming and other emerging fields besides helping India prepare to play a larger role in building the metaverse.

In the recent past, the sector has seen various reforms from government institutions, which include the appointment of the Ministry of Electronics and Information Technology (MeitY) as the nodal body for regulating online gaming. Additionally, the Ministry of Youth Affairs and Sports (MYAS) had been appointed to regulate Esports as part of multiple sports events. “Globally, the AVGC sector is a $350 billion industry and India contributes only one percent to it, which highlights the potential for growth,” Hansa Mondal, founder and chief operating officer (COO), Ssoftoons Media Entertainment LLP, said.

According to market consumer data firm Statista, the animation and VFX industry in India is likely to grow by 26% to a value of $2.2 billion in 2024. Additionally, the firm estimates that the online gaming industry in India will grow at a compound annual growth rate (CAGR) of around 15%, with a worth of $1.83 billion.

Industry experts believe that online gaming is at the cusp of a major transition, with the allocation of a nodal ministry and suggested amendments to the IT Act, it is moving towards a strong structural framework. “The need of the hour is to have a progressive taxation regime to help India become a global gaming hub. We believe that gaming is going to be one of the key sectors in the next five years which will drive significant growth in employment opportunities. We hope that the budget will contain announcements that promote Indian game developers and service providers to grow the ecosystem holistically,” Gaurav Kapoor, chief finance officer, Baazi Games, stated.

For Mondal, it is believed that the AVGC sector is heavily dependent on technology that is quickly evolving. Hence, access to financial support from the banking and government sectors is vital for the growth of smaller artists and gaming studios. “Subsidies or funding support for smaller or regional studios and start-ups in the sector will encourage entrepreneurs in the sector,” he added. To facilitate this growth, he further advocates that the industry recommend proper government and university-recognised courses in the AVGC sector for students that can encourage them and help parents recognise it as a legitimate career option.

For Bharat Patel, chairman and director, Yudiz Solutions, the AVGC policy by the finance minister will lay a path for organisations to synergise such technologies and provide scalable solutions in animation, gaming, AR/VR, among others. “Establishing a task force clearly hints at how important it is for us to move ahead and utilise these modern technologies,” he added.

One of the biggest issues in the gaming industry is believed to be taxation. The taxation conundrum includes not only the rate of taxation for games of skill but also if the taxes have to be on the platform fee or the gross gaming revenue (GGR).

According to Gaurav Gaggar, who is a promoter of Poker High, the industry needs clarity from the government on the goods and services tax (GST) issue. The department intends to charge 28 percent on deposits as opposed to 18 percent on the service fees earned by the gaming platforms, which should be the case. “The GST department’s argument that deposits are akin to actionable claims does not hold true in my view as gaming platforms only earn the service fees as their revenues and accordingly should be paying taxes on that,” he observed. In addition, Roland Landers, CEO, All India Gaming Federation, believes that a well-clarified and progressive taxation regime would provide a boost to this sector and make gaming a cornerstone of digital India to be the catalyst for the country to achieve its goal of a trillion-dollar digital economy.

To elaborate on the need for progressive taxation, Ashish Philip Abraham, partner, Lakshmikumaran and Sridharan Attorneys added that tweaking the TDS threshold qua the player from qua the game will have a negative impact on the sector along with hurdles in verifying the threshold across the platform. “The Union government will await the recommendations of the GST council on the report submitted by the Group of Ministers (GoM) before announcing any changes in the Budget,” he concluded.

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First published on: 13-01-2023 at 09:34 IST