It’s an interesting time to be a gamer today and a rewarding opportunity for gaming platforms in India. From a pre-pandemic steady growth curve to a steep positive trajectory during and after the lockdown, the affinity for gaming has exponentially increased. Completing seven great years in this gaming industry, PlayerzPot is better suited than ever to experiment with new categories in fantasy and casual gaming. That’s simply because the talent pool of the entire gaming community, including players, developers, and companies, is in a healthy expansion phase.
Over the last few years, several unicorns have emerged in India across travel, gaming, crypto and other industries, leading to significant investments and innovations across these sectors. The government is taking note of this development in start-ups and laying down regulatory frameworks for emerging industries. Online gaming is not one to lag behind. Some of India’s leading online gaming companies have received international investments and are listed on exchanges today. One of the select industries to boost India’s economy, online gaming has supported several sectors such as IT and Telecom and has grabbed a spot in the top five global mobile gaming markets. The demand is such that the Indian skill gaming sector acquired a market size of around Rs 7,900 crores in the financial year 2021-22 and is projected to reach Rs 15,000 crores in FY 2023-24.
Recognising the potential of the online gaming sector, Prime Minister Narendra Modi, during the Union Budget 2022, emphasised tapping the potential of the Indian online gaming industry by focusing more on the AVGC (animation, visual effects, gaming, and comics) sector. Amid such a growth trajectory, a sudden jump in the government’s taxation from 18 percent to 28 percent might seem to be a harsh speed breaker. But that doesn’t impede the long haul, which all of us are in for. Let’s know why?
28 percent GST: A win or a bust?
Our industry is evolving and has been constructed well with the current 18 percent GST, which is levied on the gross gaming revenue. While it is still not clear if the tax would be levied on gross revenue or on transactions, let’s analyse both sides. If 28 percent GST is levied on gross revenue, it will upset the current cash flow of the system. The gaming platforms would then need to optimise their resource allocation but would eventually absorb this hit and distribute it evenly across their expenditures. In doing so, it will not pass that burden on to the consumer, who is enjoying the gameplay at an affordable price point.
However, if we are looking at the possibility of a 28 percent GST tax slab on the entire transaction value (gross gaming value), it will lead to almost a 900 percent increase in taxes. This might pressurise the gaming companies to an extent where they reduce the pool price. This, in turn, might demotivate players who were rooting for bigger prize money and might even leave their current platform for another one offering that.
Today, the Indian online gaming industry is already valued at $300 billion and is attracting global investment. A diverse demographic supports this industry, with every stakeholder working hard to operate on fiercely competitive commission fees. The decision to tax the initial amount will put a greater burden on the players while complicating the tax collection process. It is important to note that ethical and progressive platforms in online gaming have already been struggling to differentiate themselves from gambling.
Keeping the plight of an increased tax slab aside, we should also focus on the silver lining behind this decision. If a progressive platform absorbs an increased tax slab, it will come under the ambit of government regulations. That would effectively dissociate the said brand and its product offerings from the unorganised and unscrupulous gambling sector. In this way, online gaming will become mainstream with governmental recognition, attracting investment and boosting consumer trust.
Concluding thoughts
I strongly believe that the Indian online gaming industry is on an appetite for expansion, and should be ready to absorb a 10 percent tax hike to serve the larger interest of national acceptance. With product and technological innovation, the players will eventually be better equipped to regulate and streamline ongoing operations within the system.
What the industry awaits now is necessary clarifications from the government and a regulatory framework that provides a clear growth roadmap which allows doing business pan India. The industry is responsible and adheres to government guidelines. Therefore, we are expecting a fruitful decision from the government and a meticulous tax regime that helps each online gaming company continue to do what they are doing, which is helping young entrepreneurs get into gaming, generating employment, and providing high-tech solutions in entertainment and gaming.
The article is authored by Mitesh Gangar, Co-founder & Director of PlayerzPot, an online gaming platform. The views expressed are personal.
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