Earlier this month, the Goods and Services Tax (GST) council implemented a 28 percent tax on online gaming, casinos, and horse racing. Finance Minister Nirmala Sitharama, on July 11, announced the new taxation policy, adding that tax would be levied on the full face value of transactions, which included the amount being wagered or deposited for the game. Since the announcement, industry stakeholders, which include investors, gaming companies and others, have expressed concerns about the impact of the ‘online gaming’ tax on businesses, industry jobs, and foreign investment.
Now, over 45 video game companies in India, representing the games industry in the country, have written to the Prime Minister’s Office, Ministry of Electronics and Information Technology, and the Ministry of Information and Broadcasting in a joint letter to address the ambiguity surrounding ‘online gaming’, drawing a clear distinction between video games and real money gaming/ fantasy sports. The letter requests the Indian government to implement a distinct recognition of the games industry in India, and to avoid video games and e-sports from being clubbed with real money gaming and online fantasy sports.
Signatories to the letter, which include Indian video game companies like SuperGaming, Outlier Games, GameEon Studios, and more, have clarified that the recently announced 28 percent GST on online gaming does not affect video games. “Indian Video Games Industry (valued at $812 million — about Rs. 6,660 crore — as of 2022) are unaffected by the recent developments on the GST as these sectors continue to be taxed at 18 percent and supported by the Indian government through the planned AVGC-XR Policy,” the consortium of game companies said in a press release.
Furthermore, the signed letter to PMO, MeitY and the I&B Ministry calls for a clear separation between video games and real money gaming/ fantasy sports, citing misinformation campaigns associating the entities. “While this assertion is objectively false, due to the usage of an overly broad term like ‘Online Games’ different industries are unjustly clubbed together, leading to widespread confusion. This confusion, in turn, fueled controversies and heated debates surrounding the imposition of 28 percent GST,” the letter reads.
The video game companies have thus called for categorising games that involve wagering real money as ‘iGaming’, as is standard practice globally. “To sustain and further develop our industry’s growth trajectory and economic contributions, we emphasise the critical need for clear differentiation and categorization of Video Games as separate entities from Real Money Games and Fantasy Sports (iGaming) as it is done across the world,” the letter says.
“What is being called ‘Online Games/Online Gaming’ in India is known as ‘iGaming’ internationally. It’s also pertinent to highlight that the global games market revenue of $184 Billion does not include revenue from RMGs and Fantasy Sports,” the press release further clarifies. The letter also maintains that the umbrella term of ‘online gaming’ and consequently the association with real money games has left the Indian video games industry battling ‘unfair social stigma’ and ‘clouded investor perception’.
The game companies also highlighted the need for a distinction from the perspective of gamers. “Gamers know the difference between Real Money Gaming, Fantasy Sports, and video games. The rules should evolve to reflect these differences as well. This would ensure the best practices — and more importantly — protections for India’s 500 million plus gamers,” Roby John, co-founder and CEO at SuperGaming, said in the press release.
While video games do not come under the ambit of the new taxation policy, 28 percent GST will be levied on fantasy cricket apps that have gained widespread popularity in the country in recent years, among other fantasy and real-money games. These apps have also sparked concerns of addiction among players, and could lead to financial harm with real money wagering involved.
Investors such as Tiger Global and Peak XV, which have invested in fantasy sports companies like Dream11 and Mobile Premier League, have claimed that the ‘online games’ tax will stifle foreign investment and put $2.5 billion (roughly Rs. 20,500 crore) already invested in the sector at risk.