With the Narendra Modi-led National Democratic Alliance (NDA) poised to come into power for the third consecutive term, India's real-money gaming (RMG) industry will be eagerly seeking for regulatory clarity in the burgeoning sector.
Real-money games, where the transfer of money is involved, currently forms the bulk of revenues of the country's overall gaming industry. It is also one of the rare segments in India's digital economy that has multiple companies with sizable profits.
The sector, however, currently stands at a critical juncture with its future growth resting on the implementation of a comprehensive regulatory framework in the country, and the outcomes of the upcoming court rulings related to GST notices, the constitutional validity of state-level bans on real-money gaming formats and the role state governments have in regulating the sector, among others.
The industry will be hoping for a review of the government's 28 percent Goods and Services Tax (GST) tax regime that has led to a significant increase in the tax outflow of companies. This move had resulted in a wave of layoffs across the sector, with many startups even shutting down in the past few months.
Also read: India's real-money gaming sector had a rough 2023. Will 2024 be any better?
Last year, the GST council had agreed to review its decision to levy 28 percent tax on the full face value of player deposits six months after its rollout in October 2023. However, the council is yet to convene this year. According to multiple media reports, the next GST meeting is likely to happen after the formation of the new government.
That said, Moneycontrol had reported in April that the sector might not get any prospective relief after registering a tax windfall since the new rates came into effect.
GST collections from the real-money gaming sector touched Rs 3,470 crore in the October-December 2023 quarter, up 5.7x from Rs 605 crore collected in the previous quarter, a government official told Moneycontrol in April.
To make matters worse for the industry, Indian authorities have also served retrospective tax notices to a slew of skill-based gaming firms such as Dream Sports, Gameskraft, Games 24x7, Delta Corp's Deltatech Gaming, and Head Digital Works (A23) for alleged tax evasion to the tune of over Rs 1 lakh crore.
About 71 show-cause notices have been sent for alleged GST evasion worth Rs 1.12 lakh crore in 2022-23, and in the first seven months of 2023-24, Minister of State for Finance Pankaj Chaudhary said in the Rajya Sabha in December 2023.
A batch of 30 petitions by real money gaming companies challenging retrospective GST notices demanding payment of thousands of crores calculated at 28 percent on the face value of bets is currently pending before the Supreme Court.
These 30 petitions include 27 pleas transferred to the Supreme Court from various high courts, two original writ petitions filed by Head Digital and Play Games24x7, and finally, a appeal filed by the GST department challenging a Karnataka High Court verdict.
These cases are likely to be heard in July after the summer break, Moneycontrol reported in April.
New regulatory framework
The new government will also have to chalk out a framework to regulate the sector after the IT ministry reportedly scrapped the earlier plan of appointing self-regulatory organisations (SROs) to determine whether a real-money game is permitted to operate in India or not.
In February, the country's junior IT minister Rajeev Chandrasekhar had said they are progressing towards creating a framework to allow safe infrastructure and permissible gaming. The third term of Prime Minister Narendra Modi will establish a more stable and predictable regulatory environment, he said.
Last month, Modi had stated his intentions to cement India's leadership in the global gaming market.
The Indian gaming industry clocked $3.1 billion revenue in FY23, registering a 19 percent growth from $2.6 billion in FY22. The sector is expected to touch an estimated $7.5 billion by FY28.
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