Online Gaming in India seeks clarity on taxation

Online Gaming in India seeks clarity on taxation

The online gaming industry is expected to grow at a compound annual growth rate (CAGR) of 22% to $2 billion by 2023, up from $906 million in 2019, according to a report by All India Gaming Federation (AIGF) and EY India. 

Largely driven by young and tech-savvy population, broad internet coverage, affordable smartphones with better performance, India is now the fifth largest online gaming market globally which is further expected to grow after covid-19 induced digitization.

Considering the growth prospects of the industry, the report also analyses the GST implications and impediments therein that may impact the business operations for the industry. It said that the tax rate should not exceed 20%, as this can result in the gaming operators as well as consumers to not join the licensing system of the government and entering the grey market.

Online games operate either on the ‘rake fee’ model wherein the gaming platform charges a rake fee for facilitating the play of games or ‘freemium’ models wherein the gameplay is free but additional features may require the user to purchase certain items for a monetary price. A rational imposition of Goods and Services Tax (‘GST’) is important for sustaining this industry, the report said.

Highlighting the much debated topic of legality of online gaming in India, the report stated that various high courts across the country have held that Rummy, Poker, and Fantasy Sports games are games of skill and do not amount to betting or gambling. E-sports shall also qualify as a game of skill by applying the principles laid down by the courts.

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