Centre’s efforts to promote the homegrown gaming industry lack consistency

Two Task Forces Set Up to Support Gaming Sector, while a GoM Seems to be Trying to Kill It with Overtaxation

During the first half of this year, the Central Government set up two separate task forces, one aimed to promote the homegrown gaming industry together with adjoining segments, and the other - to support it with the needed regulations. At the same time, however, a Group of Ministers (GoM) mandated last year to recommend a GST policy regime update for online gaming, offline and online casino app entertainment, lottery and horse racing seems to be trying to kill the industry with overtaxation.

The regime recommended by the GoM not only does not differentiate between a real money online blackjack casino and an online game of chess with a contest entry fee, but envisages a hike of the tax burden for legitimate Indian online gaming companies to the tune of 1,100 percent.

The Central Government is Looking to Create a Suitable Environment for Gaming Businesses

In July, a written reply by the Minister of State for Electronics and Information Technology Rajeev Chandrasekhar assured the Lok Sabha that the Union Government is seeking to develop regulations that would promote ease of doing business for the online gaming industry and would create a suitable environment for the homegrown gaming businesses.

"Online gaming as an industry is evolving and has expanded across horizons. This Ministry has been interacting with the online gaming platforms and other stakeholders to evolve possible roadmap of regulation so as to promote ease of doing business and to provide suitable eco-system for the indigenous platforms," Mr. Chandrasekhar wrote to parliament.

He also pointed out that on April 8 the Animation, Visual Effects, Gaming and Comics (AVGC) Promotion Task Force was formed following the initial announcement made earlier in the FY 2022-23 Union Budget. The task force is to further unleash the potential of the Indian AVGC sector which has the capacity to become the torch bearer for the “Create in India” and “Brand India” initiatives, the E&IT Minister highlighted.

India to Catalyse Innovation in Gaming while Protecting Gamers

Earlier in July, following a meeting with representatives of the gamer community, Minister Chandrasekhar tweeted that “Gamers are important stakeholders in #OnlineGaming. Met with thm to hear their views as @GoI_MeitY develops a policy framework for #onlinegaming in #India - that catalyses innovation in sector while protectng gamer’s rights, privacy & safety.”

In May, the Central Government constituted a seven-member inter-ministerial panel and tasked it to draw up and recommend a broad framework of laws to regulate online gaming and to identify a nodal ministry to oversee the functioning of the sector.

The panel was directed to examine global best practices on gaming regulations and consult experts in the field while elaborating its proposal, focusing on ease of doing business, compliance burden, gamer protection and other aspects.

The gamers who were invited to participate in the process and share their views on future regulations, asked the gamer community to be granted a place in self-regulatory bodies when such are established. They also shared concerns over the gaming bans in some states which prevent even professional chess players from practicing their skills before appearing in national and international tournaments.

GoM GST Recommendations Moving Contrary to Centre’s Intention

While the Central Government is actively broadcasting its intentions and efforts to promote the homegrown gaming industry in a way ensuring a safe gaming environment for the citizens, the GoM set up by the GST Council to elaborate new levy policies for the sector has proposed changes which, if implemented, will devastate the industry and send users to the perils of the black market.

The proposal by the GoM envisages the full turnover of online gaming companies to be charged with 28 percent GST. As of the moment, such platforms pay 18 percent indirect tax over their Gross Gaming Revenue (GGR) which constitutes the fees or commissions taken by the companies for the services they provide to gamers.

The current regime leaves the rest of the contest entry fees, which goes towards the creation of the prize pools to be distributed among winning players, tax free. As per calculations by the Internet and Mobile Association of India (IAMAI), an implementation of the newly proposed GST policy will raise the tax burden over gaming companies by 1,100 percent.

Such a development, IAMAI warns, will force platforms to significantly raise contest entry fees and lower offered prize pools. This will destroy the industry and send gamers to look for alternatives on the illegal market or offshore, and fully compromise the Central Government’s declared intentions to promote the homegrown business while protecting the gamers.