Recent years seem to have shown an upward trend in growth of Indian gaming industry. From what it’s understood, India’s youth is driving this trajectory, which’s creating new income opportunities and gaming genres. With India considered as a big global gaming market, estimates have shown that Indian online gaming industry will clock five billion dollars by 2025.
Going by market reports, Indian gaming industry has secured Rs 20,000 crore in foreign direct investment (FDI), and contributed Rs 2,200 crore worth GST to Indian Exchequer in 2022. Market experts suggest that Indian gaming industry is helping fuel India’s one trillion dollar digital economy plan. However, questions have been raised on the taxation regime around Indian gaming industry that could affect Indian prime minister’s vision of Indian gaming sector.
In current context, Indian gaming industry pays 18% GST on gross gaming revenue (GGR). A session around a group of ministers was organised to decide whether the industry should pay GST on GGR or contest entry amount (CEA). Market analyses have highlighted that GST imposition on CEA would put gaming industry with gambling and betting sectors, which could contradict recent regulatory and judicial developments. Assigning Ministry of Electronics and Information Technology (MeitY) as nodal ministry for online gaming, along with suggested guidelines around SRB certification to separate online gaming from betting and gambling, has seemingly emphasised the need for an online gaming tax regime.
According to TDS rule developments in Budget 2023, online gaming shouldn’t be considered in the same bracket as betting and gambling. Moreover, elimination of Rs 10,000 limit for TDS implies that 30% TDS can be applied to all net winnings, to remove tax evasion possibilities from the online gaming prize pool. If judgement passed by Karnataka High Court in the Gameskraft case is to be quoted, it specifies that games of skill cannot be in the same taxation regime as games of chance. The judgement also stated that actionable claims with regard to lottery, betting and gambling can only be categorised as goods excluding games of skill applications on it. It’s to be noted that the skill loto judgement doesn’t apply for online gaming.
It’s believed that this online gaming taxation regime can result in ramifications. With reportedly 50 crore online gamers in India, this taxation can cause a 40-50% hike in playing games’ expenses, which can increase access to illegal offshore platforms. In order to guarantee a proper taxation framework, points understood to be kept in mind are maintenance of status quo for online gaming, getting hold of SRB certification, and reconvening the GOM to demarcate taxation between permissible and non-permissible games.