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Predictable And Progressive Taxation Can Make India Global Gaming Hub: Experts

As per estimates, Online Skill-Based Gaming (OSG), is about $2.5 billion industry with a CAGR of over 38 per cent

Predictable And Progressive Taxation Can Make India Global Gaming Hub: Experts

Press Trust Of India

POSTED ON December 28, 2022 3:41 PM

A clear and consistent approach to personal taxation is necessary for realizing India's vision of making AVGC (animation, visual effects, gaming and comics) a high-growth sector, experts said.

A high incidence of tax deducted at source (TDS) to the tune of 30 per cent on gaming income is creating an incentive for offshore platforms that are not under any regulatory obligations and where no taxes need to be paid, to thrive in India, they said.

Such evasion of taxes will be a huge loss to the government and will eventually even kill the domestic industry.

An AVGC Promotion Task Force report, constituted by the government has proposed a national AVGC-Extended Reality Mission with a budget outlay to be created for integrated promotion and growth of the sector.

As per estimates, online skill-based Gaming (OSG), is about a $2.5 billion industry with a CAGR of over 38 per cent and is projected to grow to $20 billion by 2030 in terms of revenue.

According to Games24x7 founder Trivikraman Thampy unlike gains in contests like lotteries where one competes with thousands of others at a given point of time, gains in any single online skill game are not massive because it is only between a few players.

"So, even if a player wins 70 per cent of the games, the player will have to go out of pocket to pay the taxes. If the laws written keeping in mind crosswords and lotteries were to be implemented in online gaming, the implications would be disastrous," he said.

Unlike the stock market, gaming players can go to online global gambling platforms which are illegal and outside any tax net and where they need not pay any tax as the geographic boundaries for digital transactions are very porous, he added.

In order to create a global gaming industry and create allied industries, Supreme Court Senior Counsel, Rohan Shah, said there is a need to dovetail the tax provisions of the 1970s with the new-age industry of 2022.

"We should also look at other countries on how they are tackling this issue. In the US, income from gaming is treated as normal income where you can claim your deductions. In the UK, winnings are not subjected to any income tax at all," Shah said, adding, a predictable and progressive tax regime is needed to make India a global gaming hub.

There is a need for a very simple easy to interpret tax regime for a sunrise industry like Online Skill-Based Gaming, Swapan Sarkar, chief executive, of Sarkar and Associates said.

"Income tax means that taxability has to be on the income and not beyond that. Section 115 talks about winning from lottery and crossword puzzles – which cannot be on the same page since one is a game of luck and the other is of skill," Sarkar said. 

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