Indian gaming industry seeks clear tax regime, duty credit scrips in Budget

Budget 2023: They also suggested that the Centre can also consider levying separate tax slabs for each game category, like casual games, fantasy games and esports

India's online gaming industry has the potential to scale rapidly, and the Centre should provide a clear and progressive tax structure for the sector in the Budget 2023, experts told Business Standard.

"A well-clarified and progressive taxation regime would provide an immense boost to this sunrise sector. Such a move will make gaming a cornerstone of Digital India and be the catalyst for India to achieve its goal of a trillion-dollar digital economy," said Roland Landers, chief executive officer of the All India Gaming Federation (AIGF). 

"We hope the government provides clarity on the tax slab applicable on skill gaming," said Sai Srinivas, co-founder and CEO of gaming platform MPL.

The Centre had proposed 28 per cent GST on the gross gaming value (GGV) of all games played, over the current 18 per cent on the commission of the gaming companies. According to experts, this would have an existential impact on the segment. 

Further, a reduction in the TDS threshold from the current winnings exceeding Rs 10,000 was also proposed. 

"The increase in GST and TDS cumulatively would completely wipe out the homegrown industry that has the potential to be the largest next generation of exports of consumer tech products made in India for the world. In this budget announcement, we are hoping to see a continuation of the current GST slab and TDS threshold as a sharp increase in tax will deter growth, sink early-stage startups further into losses and overall make the industry unviable. A clear and supportive tax policy will not only generate revenues for the exchequer but will also create great value in the long run for the country and the gaming ecosystem," said Paavan Nanda, co-founder of gaming platform WinZO games.

In December 2022, the Finance Ministry said that claims from betting and gambling, including those from online gaming, would attract GST at 28 per cent. It added that there was no differentiation between games of skill and games of chance.

Experts said that 2023 is likely to be a tough year for the global economy, and the gaming sector has the potential to bring substantial export revenue. Gaurav Agarwal, co-founder of the online platform Gamezop said that a Duty Credit Scrips scheme could be introduced to boost forex. 

"I am hopeful that the FM takes note of this and considers a well-defined Duty Credit Scrips scheme for India gaming companies bringing in foreign currency into the economy," he said. 

The Centre introduced duty credit scrips to boost exports. They allow the exporters to pay their tax liability by setting off import duties like customs duty and anti-dumping duty. This incentivises exports and saves tax for the exporters. 

Apurv Modi, managing director and co-founder at ATechnos Group, suggested that the Centre can also consider levying separate tax slabs for each game category, like casual games, fantasy games and esports. 

Also, "the government may impose lower tax regulations on skill-based games than the existing. The government should also not impose any taxation on games associated with education or e-learning," he added. Lately, many gaming platforms have been focussing on educating consumers. This has become more rapid since the Centre released draft online gaming rules. 

The rules proposed a self-regulatory mechanism, physical Indian address, and mandatory verification of players for online gaming companies. The ministry and the industry have met several times to discuss the draft.