India’s nascent online gaming industry has had a remarkable rise in recent years, quickly propelling it into one of the biggest global markets for gaming. The massive youth population of the country is fuelling this expansion, along with higher disposable incomes, new gaming genres, and an increase in tablet and smartphone users making gaming more easily accessible.
Gaming is booming in India
Along with the number of gamers, India’s online game development community has been steadily growing as well. According to data, the number of gamers in India reached 507 million in FY22, up 12 per cent from 450 million in FY21. This expansion is aided by the country’s abundance of creative talent which possesses a diverse skill set in IT, design, development, and testing.
According to the government’s data, India’s online gaming market’s size was estimated to be around US$ 2.6 billion in FY22, and it is predicted to reach US$ 8.6 billion by FY27. With 15 billion mobile downloads in FY22, India became the largest consumer of mobile games globally, with a 17 per cent share.
Speaking of the growth and development of India’s online gaming industry, the CEO of the All India Gaming Federation (AIGF), Roland Landers says, “With the Animation, Visual Effects, Gaming and Comic (AVGC) Promotion Task Force’s recommendations for a Game Development Fund and the Annual Gaming Expo, the recognition of the Ministry of Youth Affairs and Sports as the nodal ministry for eSports, and the draft IT Rules for gaming intermediaries, the gaming industry is well positioned to be a torch bearer for Brand India.”
While the gaming industry was not considered a career option by most people earlier, new-age talent is currently entering the industry and it sees game development as a legitimate career option.
Due to this, the industry is anticipated to continue advancing and eventually achieve remarkable heights. For that to happen, experts from the Indian gaming arena have some suggestions and expectations from the upcoming Union Budget 2023-24, which will be unveiled on February 1, 2023.
Supportive taxation is the need of the hour
Commenting on the pre-budget expectations of the industry, AIGF CEO Landers says, “A well-clarified and progressive taxation regime would provide an immense boost to this sunrise sector. Such a move will make gaming a cornerstone of Digital India and be the catalyst for India to achieve its goal of a trillion-dollar digital economy.”
As the industry is currently in its nascent stage and needs stability and clarity from a tax and compliance perspective, it is in dire need of a robust tax ecosystem.
Commenting on the same, Paavan Nanda, Co-founder of WinZO, who anticipates an increase in the GST rate, says, “The proposed 28 per cent GST on the Gross Gaming Value of all games played, over the current 18 per cent on the commission of the gaming companies, would have an existential impact on the segment.”
Similarly, further announcements on TDS are also expected. The TDS liability on winnings above 10,000 already stands at 30 per cent under the IT Act of 1961. About this, Nanda further says, “A reduction in the TDS threshold from the current winnings exceeding Rs. 10,000, could also impede the growth of the industry. In this budget announcement, we are hoping to see a continuation of the current GST slab and TDS threshold as a sharp increase in tax will deter growth, sink early-stage start-ups further into losses and will overall make the industry unviable.”
In last year’s budget, the government recognised the gaming sector as one of the potential segments for job creation in India. It also set up the Animation, Visual effects, Gaming, and Comics (AVGC) promotion task force to realise the potential of this segment. Due to this, the gaming sector has high hopes from the upcoming union budget. “We are hoping for the announcement of constructive action in that direction to give a boost to the gaming industry,” Nanda further adds.
Policies for ease of doing business
Being new to the economy, the gaming industry and its stakeholders, entrepreneurs, and its governing body are still struggling with the complexities of gaming concepts, regulations, and policies.
The start-ups and entrepreneurs in the gaming industry are seeking ease of doing business.
Hoping for some more constructive measures from this budget, Arpit Jain, Founder and CEO of GreedyGame says, “We are expecting the simplification of compliances to ensure ease of doing business for Indian companies. The Union Budget 2023-24 can add to the ongoing effort to simplify the overall tax regime, which will boost growth.”
“We would like to see the government make policies to specifically help those start-ups that make products and services that are used by global companies. In this direction, benefits for the app monetisation industry must be kept in mind to democratise the app economy. At the same time, we are hoping for friendly policies for nurturing app developers to enable them to grow their innovative ideas into viable and profitable start-ups,” he adds.
Weighing in, Ankur Singh, CEO and Founder of Witzeal Technologies says, “We believe that government backing would provide the entire ecosystem with the much-needed boost it needs because the industry is creating opportunities for the start-up space, is luring FDI, and is boosting the national economy.”
“A profusion of job prospects can then be further tapped by rewarding innovation when a government body or an SRO is in charge of overseeing the entire industry,” he adds.
Speaking about the same, a Partner in Lakshmikumaran and Sridharan Attorneys, a full-service law firm, Asish Philip Abraham says, “Certainty and consistency in tax policies in line with international practices is the need of the hour for the sector which is plagued with multiple tax investigations.”
A legal framework is imperative
For any industry to grow properly, legal regulations are very important. Hence, the continued momentum set by the AVGC task force, and a progressive tax regime is a major demand from the sector.
Highlighting the same, Abraham says, “The sector is looking forward to the ‘light-touch self-regulation’, a mechanism for the setting up of the Game Development Fund as recommended by the AVGC taskforce. The industry expects a positive impetus from the budget to make India a global hub for gaming as recommended by the AVGC Task Force in their report “Realising the AVGC-XR Sector’s Potential in India.”
He further says, “The TDS amendment may turn out to be counterproductive. The UK and France have made progressive legislative changes to stop their gaming operators from moving to offshore locations due to regressive tax regimes. The Union Government will wait for the recommendations of the GST Council on the report submitted by the Group of Ministers (GoM) before announcing any changes in the budget.”
Overall, the stakeholders of India’s online gaming industry are enthusiastic about the already established framework and are hoping for its implementation along with a cut down in taxation and a simplification of the policies that are relevant to it.