According to a report by Primus Partners titled “Online Gambling in India: The Taxes Quandary,” regulating online gaming will address several social issues and provide new economic opportunities in the sector.
The sector saw encouraging announcements in the Union Budget 2023–24 since they addressed the industry’s long-standing request to include the offset of losses in the calculation of earnings from online gaming for income tax, but the study discovered an essential issue regarding the Tax Deducted at Source (TDS) on online video games implementation mechanism suggested in the Union Budget.
According to the report, “The issue has arisen due to amendments to section 194B under which online gaming is currently covered from April 1, 2023, and the separate provision on online gaming, i.e., section 194BA coming into force from July 1, 2023, leading to an anomaly.”
To avoid any ambiguities in interpretation, the report suggested it would be ideal for streamlining the application of the amendments for ‘online games’ and establishing a single effective date of April 1, 2023. Alternatively, the current tax regime could be maintained from April 1, 2023, to June 30, 2023.
The report said that many smaller and mid-size gaming enterprises would have a hard time with the ongoing advancements that will also increase industry costs and result in unnecessary expenses. It also discussed countries where the gaming industry has proliferated using the Gross Gaming Revenue (GGR) tax model.
“Levying GST on the total face value would be a departure from established practices, besides making the sector unviable. The recent changes in TDS on income from the prize pool in online gaming without any threshold should be considered by the GST Council,” the report further added.
It also added that India’s online gaming industry is expanding quickly and is projected to expand at a CAGR of about 27% over the next five years. The report also noted that the industry has the potential to significantly boost India’s GDP and create more than one million new jobs by the year 2030, which is quite similar to the report by TeamLease Digital.
CEO of Primus Partners India, Nilaya Varma, said, “A robust and enabling regulatory framework for a dynamic sector like online gaming would ensure a responsible, transparent and safe environment for all.”
“The online gaming sector holds tremendous potential if it is encouraged with the right regulatory support from the government and a growth-friendly tax regime,” he added.