Here’s Why Online Gaming Startups Could Be Grinning Right Now

In what could be a relief for the gaming industry, the Group of Ministers (GoM) may recommend an 18% tax on gross gaming revenue (GGR) versus an earlier-recommended uniform GST of 28%.

Further, the GoM headed by Meghalaya Chief Minister Conrad Sangma could also recommend the highest 28% GST on betting, casinos and horse racing, the ET reported. Hence, it would differentiate between games of skill and games of chance, a move requested by the industry for a long time.

The recommendations are expected to be finalised after the introduction of the IT Intermediary Amendment Rules 2023. Moreover, the GST council will take the final decision in its next meeting, which is likely to be held in May last week or June first week.

The GoM was constituted last year to examine the issue of valuation of services provided by casinos, race courses, and online gaming and whether any changes were required in the legal provisions to adopt any better means of valuation of these services.

Currently, a tax rate of 18% is levied on the commission collected by online gaming platforms for games not involving betting or gambling.

The change in the GoM recommendation comes after the Finance Act, 2023, recognised the online gaming industry as a new-age industry and distinguished it from gambling and betting.

The Finance Bill 2023 introduced two new Sections – 194BA (for TDS on winnings from online games for online intermediaries) and 115BBJ (for computation of taxes for those who earn income from winnings of online games).

Before any decision, the Centre is likely to recommend one more round of consultation with the industry stakeholders and GST officials.

According to the change in the Finance Bill, from April 1, online gaming is subject to 30% on any prize money customers earn. Before March 31, 2023, TDS was imposed on winning amounts from online games if they exceeded INR 10,000.

While the online gaming industry has been facing uncertainty in regulations, the Ministry of Electronics and Information Technology (MeitY) notified the rules for online gaming, following months of consultation last week. While it brought legal clarity to some extent, the industry is still awaiting clarity on taxation.

India’s gaming market was estimated to stand at $ 2.6 Bn in FY22. It is now predicted to reach a size of $8.6 Bn by FY27, according to a report by Lumikai. The number of gamers in India stood at 507 Mn in FY22, growing at a CAGR of 12% from 450 Mn in FY21.