Blanket 28% GST could hit online gaming badly in India, says industry

Online gaming players in India fear that the industry may be badly hit if the Centre proposes a blanket goods and services tax (GST) of 28 per cent on it. According to Roland Landers, chief executive officer (CEO) of the All India Gaming Federation, this move could hamper the booming industry’s upward trajectory and lead to closure of businesses in the sector.

Landers added that the Indian online gaming industry needs a GST regime that can protect and promote the segment, which houses over 900 start-ups.

“Further, it is widely accepted that when a legitimate industry is taxed at unsustainable rates, the legitimacy is damaged. Illegal players start operating, which is unsafe for users and also damaging to the country’s exchequer,” he said.

“A game is categorised as a skill-based game only when the success predominantly depends on the skill of the player. This includes superior knowledge, training, attention, experience and adroitness,” added Landers.

Business Standard had reported that the GST Council is likely to consider a proposal for imposing a flat 28 per cent tax on online skill gaming. This is the same tax rate as that of betting and gambling.

The country’s gaming industry is currently estimated at $1.5 billion. Also, India is the second-largest online gaming market in the world with an annual growth rate of 38 per cent. More than 300 million mobile users play online games in India. This is almost one-fourth of the country’s population.

According to industry leaders, the Indian gaming industry is the fastest-growing segment in the $24-billion media and entertainment market.

An Invest India report had said that the gaming industry has the potential to capture around 5 per cent of the global market in the animation, visual effects, gaming and comics (AVGC) sector by 2025. It would have a 25-30 per cent annual growth and over 160,000 new jobs annually.

The 2022 Budget had proposed to set up a promotion task force for the AVGC sector, calling it a sunrise industry. The industry saw exponential growth during the pandemic. It has been growing at a compound annual growth rate (CAGR) of 40 per cent from 2019, according to a Deloitte India report.

Mobile gaming, in particular, witnessed massive growth in the country, with 7.3 billion game installs in the first three quarters of 2020. If this was not enough, investor capital is also fuelling the growth with the industry contributing three unicorns to India. According to Invest India, total funding for the sector touched $350 million between 2014 and 2020.

The online gaming arena is broadly divided into skill-based games and games of chance. Online skill-based games include poker, rummy, fantasy sports gaming and a multitude of casual e-games. On the other hand, Esports companies are attracting gaming enthusiasts with tournaments at different levels. The competitions offer captivating prize money to engage more players.

Indian version of PUBG Mobile — Battleground Mobile — organised a pro series, which had a total prize pool of Rs 2 crore and saw 24 teams participating. The top team, SouL, won Rs 75 lakh in the grand finals.

A top player of a national-level tournament of Rogue Heist — a shooting battle game — in the Mobile Premier League can win a prize of Rs 6.25 lakh.

Yash Pariani, founder and CEO of Esport start-up House of Gaming, said, “The government may put the same amount of taxes on chance-based games, which technically doesn’t require as much effort as Esports. It requires years of practice to reach a certain level.”

He added that, “The taxation will be harsh as it may restrict the blooming Esport industry in India. Nevertheless, it is expected to grow exponentially in the years to come.”