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Online gaming industry shares expectations from Budget 2023

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With the rise in the gaming population in India, several changes have been proposed in order to regulate the online gaming industry.

These changes include the proposed draft gaming rules by the Ministry of Electronics and Information Technology (MeitY), which is appointed as the nodal ministry for online gaming, and a change in the current taxation system for online gaming.

The Indian Gaming Industry consists of real money gaming, esports and fantasy sports is pleading with the government to maintain the current goods and services tax (GST) rate of 18% rather than raising it to 28% for online gaming.

Additionally, the industry also requests that the GST only be applied to the platform providers’ commissions rather than the total prize money awarded to winners of esports competitions and real-money 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 spending purchases related to gaming. Raising the slab to 28% would set us back to square one,” according to Livemint.

The taxation rate submitted by the group of ministers (GoM) to the finance minister proposed a universal tax rate of 28% and will not differentiate between games of skill or chance.

The tax rate was to be discussed during the GST council meeting on 17 December but was postponed due to lack of consensus on how to tax online gaming and casinos. According to Finance Minister Nirmala Sitharaman, the ministry will circulate the latest GoM report to all states and the matter will be discussed threadbare by all members in the next GST Council meeting.

While the industry favors a 28% tax on Gross Gaming Revenue (GGR), the government plans to GST on the entire sum (entry amount). The industry also claimed that increased tax rate might push people towards the illegal offshore gambling 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 also revealed the recommendations by task force for AVGC sector. AVGC task for the recommended establishment of a National AVGC-XR Mission with a budget to further expand the AVGC sector in India

In response to queries regarding budget expectations from G2G, Roland Landers, CEO, 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 draft IT Rules for gaming intermediaries, the gaming industry is well positioned to be a torch-bearer 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 Witzeal Technologies, Ankur Singh said, “MeitY recently published a draft of rules pertaining to online gaming for public consultation. It is encouraging to have the government supporting India’s burgeoning and promising online gaming industry to 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 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 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 MPL said, “2023 is already shaping up to be a watershed moment for the gaming industry. With the government releasing draft 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 on online gaming. We hope the government provides clarity on the tax slab applicable on 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 a uniform, progressive policy can be the wind in its sails,” he further 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 recognised 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 realise 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.

The esports gaming sector also asked for increased budgets for providing better training facilities to esports athletes that will represent the country on International level. Vinod Tiwari, president of Esports Federation of India, said, “The budget needs to be increased and allocated extensively for the growth of esports and the training of athletes.”

Gaming firms and businesses are also asking for consistent tax policies, as many firms face problems due to unclear tax policies. A well-clarified and progressive taxation is required for proper functioning of the sector.

Firms also demanded lower import taxed as to make necessary hardware available for the AVGC sector to develop AAA quality games in India as well as gaming hardware accessibility for gamers to upgrade and stay up to date with latest gaming technologies.

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