According to the Think Change Forum (TCF), India needs to make gaming-related income in line with international standards and allow expenditures and losses from gaming operations to be deducted from the income.
According to the report, the online skill-based gaming market in India is estimated to be worth $2.5 billion, with a compound annual growth rate (CAGR) of more than 38%, and is expected to reach $20 billion in revenue by 2030.
The roundtable’s advice on “What is the correct taxation method for a sunrise sector like Online Skill-Based Gaming,” the gaming industry represents a modern opportunity, whereas the relevant tax laws date back to the years 1961, 1972, and 1986.
Senior counsel member of the Supreme Court, Rohan Shah, said, “From a direct tax perspective, you first identify what is taxable. There are three elements here. Firstly, Section 115B says that anything that accrues from horse racing, gambling, betting or crosswords, among others, will be taxed at a full tax rate of 31.2 percent.”
“Another issue is TDS under Section 194B, which is deducted upfront. And the third element is Section 58(4), which does not allow for any set-offs. There is no contemplation of any loss here since, in the 1970s, crosswords was not seen as an industry,” he added.
A clear and consistent approach to personal taxation is necessary, according to the roundtable panelists, in order to fully realize the potential of this sector. If this is not the case, the proposed budget outlay for AVGC sector promotion will be at risk, and the government will lose thousands of crores in tax revenue.
The panel claims that untaxed offshore platforms that don’t deduct these taxes thrive due to a high 30% TDS on regulated platforms. In addition to increasing risk for players, this causes the government to lose taxes and foreign cash.
According to Trivikraman Thampy, founder and CEO of Games24x7, discussions in the public sphere have discussed tax avoidance in the industry amounting to tens of thousands of crores, which is not the truth and results from a lack of knowledge of the industry’s fundamental business model.
Thampy said, “Unlike gains in contests like lotteries where one competes with thousands of others at a given point of time, gains in any single online skill game are not massive because it is only between a few players. So, even if a player wins 70 percent of the games, the player will have to go out of pocket to pay the taxes. If the laws written keeping in mind crosswords and lotteries were to be implemented in online gaming, the implications would be disastrous.”
The requirement for operator certification was also a topic of discussion. Certification will assist consumers to identify legitimate platforms, support domestic industry development, and enable tax collection for the government.
A high-powered group made up of technology, tax, and financial professionals is required to create an easy and practical policy because any technology or internet based activity will provide difficulties.
