Indian gaming industry reacts to the 28 Percent GST Controversy for Online Games

The recent imposition of a 28 percent Goods and Services Tax (GST) on “Online Games” by the Indian Government has led to widespread discussions and the initiation of targeted PR campaigns. These campaigns aim to link Real Money Games (RMG) and Fantasy Sports with Video Games and Esports, both in the eyes of domestic and international media as well as gamers. The campaigns present a unified portrayal, suggesting that the entire gaming industry of India is facing negative consequences due to the Government’s decision to apply the 28 percent GST.

Indian video games industry appeals for separate categorization amidst 28 percent GST for online games controversy

The Indian Video Games industry has communicated with the Prime Minister’s Office (PMO), the Ministry of Electronics and Information Technology (MeitY), and the Ministry of Information and Broadcasting (I&B) to request a more distinct differentiation between Video Games and Real Money Games/Fantasy Sports. They propose that Real Money Games/Fantasy Sports should be referred to as iGaming, aligning with the global definition. Important details of the letter are as follows

  • The government’s decision primarily pertains to Real Money Games and Fantasy Sports, involving the act of users betting money with the aim of winning cash rewards based on the game’s outcome. In contrast, Video Games do not include any staking or wagering element and, therefore, are not subject to the 28 percent GST bracket.
  • Regarding the impact of the recent GST developments, the Indian Video Games Industry, valued at $812 million as of 2022, remains unaffected as it continues to be taxed at 18 percent. Additionally, the industry is supported by the Indian government through the planned AVGC-XR Policy.
PUBG, Clash of Clans, Fortnite
Image via GamingonPhone

Indian gaming industry’s representation efforts seek a safe ecosystem for gamers

The term Online Games has been a subject of concern for various stakeholders, as it holds different implications in Indian jurisprudence compared to its global interpretation. This disparity has caused confusion among gamers, international investors, game publishers, and media, particularly during the GST row.

The controversy surrounding the 28 percent GST has been significantly fueled by this ambiguity. It is important to note that what is referred to as Online Games/Online Gaming in India is internationally known as iGaming. Moreover, the global games market revenue of $184 Billion does not include revenue from Real Money Games (RMGs) and Fantasy Sports.

Industry representatives have consistently advocated for a clear distinction between Video Games and iGaming (RMGs and Fantasy Sports) due to the distinct nature of these industries. Efforts are underway to address this issue and other matters of interest with various ministries. The primary objective is to create an environment conducive to the growth of the video games sector and to establish a framework that ensures the safety and security of Indian gamers participating in interactive entertainment arts.

Notable Indian companies supporting this representation include Nodding Heads Games, the developer of Raji: An Ancient Epic, Dot9 Games, the developer of FAU-G, as well as SuperGaming, the creator of Indus and MaskGun, among others. The organization spearheading this representation is Outlier Games, based in Chennai.

Indus battle royale, Indus trailer
Image via SuperGaming

Quotes from 11 CEOs and founders of video games and esports companies about the 28 percent GST on online games issue

Lots of dramatic statements were shared that claimed the doom and gloom of the Indian games industry. Let’s break this myth — The Indian video games industry is thriving, with a focus on innovative R&D-driven productions and plans to release two dozen video games based on original IPs in the next five years, exporting Indian stories, character brands, and ethos globally. 

We are actively contributing to government initiatives such as ‘Create in India’, ‘Brand India’, and ‘1 Trillion Digital Economy’. Moreover, we are attracting notable strategic foreign direct investment and mentorship programs like the ‘India Hero Project’ from Sony Interactive Entertainment and unparalleled support from the government in the form of the AVGC-XR Policy. Indian video games industry is a sunrise sector today but in 3-5 years it is undoubtedly going to be a sunshine sector

Harish Chengaiah, Founder and Game Director at Outlier Games

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

India possesses immense potential in the gaming space, with a strong presence in mobile, PC, and console gaming. Despite recent concerns surrounding the 28 percent GST, it is important to note that the overall gaming industry remains resilient and unaffected. Moreover, it is crucial to dispel the misconception that this tax applies to non-Real Money Games and non-betting games. Such a misrepresentation and distortion of facts from reality undermine the vibrant gaming ecosystem that continues to thrive in India. 

Nikhil Malankar, Founder & CEO at GameEon Studios

In a country like India where video gamers are still very young and new, it is really important for the government to clarify the necessary laws and rules associated with it to create a sustainable environment for the industry to thrive. Misinformation and unclear rules & regulations can lead to the destruction of the Indian gaming industry which has the potential of becoming the industry leader in game production. 

Biprajyoti Chakraborty, Co-Founder at DIOSC Gaming

Video Games are a cultural phenomenon with stories. They are about shared moments of joy with friends and family. They are about music and entertainment! Think of them as movies. You buy a ticket. You watch a movie. You enjoy yourself. You don’t expect to make a profit. Real Money Games are more transactional in nature, they are about “Bet X to Win Y”. The GoI has been very consultative with the video game industry and has given a clear definition of such Real Money Games and defined them as

“Online Games”. And these “Online games” are the ones that have been impacted by the 28 percent GST announcement. Not Video Games. 

Mayur Bhimjiyani, Co-founder and CEO at Hypernova Interactive

While the revised GST of 28 percent will be levied on “Online Games”, it certainly does not apply to esports. It should be made clear that the 28 percent GST is for games which involve staking/wagering of money. Esports inherently does not involve any form of the staking/wagering elements and hence has no impact. 

Anurag Khurana, CEO and founder of Penta Esports

The recent announcement of imposing a 28 percent GST on casinos and Real Money Gaming doesn’t come as a surprise to me. However, there seems to be a misunderstanding circulating on various social media platforms, suggesting that this taxation applies to video games as a whole. This is an incorrect interpretation, as the statement clearly states that the taxes are applicable to the full face value of bets in online gaming, casinos, and horse racing. It is crucial to understand what falls under the category of online gaming in this context, as it encompasses the aforementioned genres as well as Real Money Gaming. Industry representatives have been engaging in ongoing discussions with the authorities to establish a clear distinction between video games and the genres mentioned above. This is the need of the hour and will help in framing the correct set of rules for the video games industry and will prove to be rewarding for the growth of this sector.

Ranbeer Hora, Managing Director GodSpeed Games

Video games are an immersive form of entertainment, fostering creativity, skill development, and social interaction. They are distinct from Real Money Games, which involve gambling and monetary transactions. It is essential to understand the government’s decision to differentiate these two realms is crucial, as it helps to debunk the misconception that video games and Real Money Games have similar taxation policies. This clarity is of utmost importance, as the misconception brings uncertainty to fellow game developers and the gaming industry, hindering their ability to innovate and contribute to the vibrant gaming ecosystem.

Deepak Gurijala, Founder & CEO, Street Lamp Games

It is worth noting that RMG and Fantasy Sports are not considered part of the video game industry in other countries. However, the negative focus on RMG has led to misconceptions about the entire video game industry in India for a considerable period of time. The classification of Real Money Gaming (RMG) and Fantasy Sports as online gaming has had adverse effects on the video game industry in India, primarily due to concerns about the wagering aspects associated with RMG. Recognising the need for clarity, the Indian government has taken steps to differentiate RMG and Fantasy Sports which involve Real Money betting from the video game industry which is purely made to entertain and educate people as a form of art like movies. This differentiation is evident through the implementation of a 28 percent (GST) specifically for RMG and Fantasy Sports, while video games are subject to an 18 percent (GST) rate. 

Mario Royston, Co-Founder and Managing Director, Weloadin Studio

The Indian video game industry is becoming self-reliant (Aatmanirbhar), but a 28 percent GST on all game types could stall its growth. We must differentiate between Real Money Games and Video Games to avoid negative impacts. By fostering a favourable tax structure, we can unlock the Video Game industry’s economic potential, boost India’s position in the global gaming market, and secure billions in future revenue for the country. 

Jemish Lakhani, Founder & CEO, XSQUADS Tech

Yet again, the Indian gamer finds himself strangled in a pile of unwanted mud. Let me simplify it for you: imagine you have a basket filled with both apples and oranges. Now, just because they share the same basket doesn’t magically turn them into the same fruit, right? Just because Real Money Games and your favourite games share the same industry, it doesn’t automatically put them in the queue for similar tax treatment. The government knows better, and so do you, my fellow Indian gamer. 

Let me break the bubble – the Indian game industry is more than Real Money Games, and believe it or not, they are here to stay. No matter what they try to tell you on social media, your beloved games will not be taxed 28 percent; that privilege is reserved for your truly, Real Money Games. So, as long as you are not chasing the fake paradise, you can continue enjoying your Clash of Clans, Valorant, and PUBG. 

Chirag Chopra, Founder & CEO, Lucid Labs

With every new law, comes some amount of misinterpretation. The GoI has always frowned at gambling in any form and has now strengthened its stand by imposing a 28 percent GST on Real Money Games. It is important to understand that there is a difference between Games such as Candy Crush, PUBG, etc and Real Money Games (anything that involves any kind of wagering). This clear distinction should only help boost the already growing gaming industry in India. 

Tarun Hinduja, Founder & Director, Firebolt Entertainment

What are your thoughts about the controversy surrounding the 28 percent GST on online games? Let us know in the comments below!

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