Online gaming sector to attract investors once taxation policy is finalised: Nirmala Sitharaman

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During the 56th Annual Meeting of the Asian Development Bank (ADB) in South Korea, Finance Minister Nirmala Sitharaman, while responding to a question from the developers of PUBG – Krafton – on India’s plan to attract foreign investment for the online gaming sector, said that the GST Council is working on the taxation policy following which the sector would attract new investors.

The minister stated that the GST Council is now deliberating on several aspects of online gaming, including taxation and regulation, at the ministerial level. “Once the policy certainty arrives, taxation becomes more… clear, it will attract investors,” she said.

The final decision regarding the tax rate for online gaming is expected to be taken by the GST Council in the next meeting which is expected to be held in June. As reported earlier, the previous council meeting was not able to finalize the tax rate, but with the recent release of the amendments to the IT Rules, 2021 by the Ministry of Electronics and Information Technology (MeitY), things appear to be moving fast now.

The sector witnessed exponential growth during the Covid-19 induced lockdowns and has only been growing ever since. A KPMG report revealed that the size of the online gaming industry was expected to grow from Rs 13,600 crore in 2021 to Rs 29,000 crore by 2024-25.

With more changes expected in a short period of time, the new rules concerning how online gaming is regulated and taxed are required. As of now, the online gaming sector will have a self-regulatory model with three SROs initially to look over the sector.

The tax rate for these online games recommended by the Group of Ministers is 28% on the entry amount. While the online gaming industry has accepted the rate of 28%, they believe that it should be levied on gross gaming revenue (GGR) and not on the entry amount. Furthermore, there is an ongoing debate that chance-based games should be taxed higher than skill-based ones.