The Indian Budget has been announced for the 23-24 financial year and a new Finance Bill for 2023. The budget has no less than seven different areas of focus for the financial year, including the financial sector, infrastructure and investment, inclusive development, green growth, youth power, reaching the last mile and unleashing the potential. With economic growth standing at 7%, the budget is optimistic and achievable. The government is aware that gaming is a high-growth industry within the country, bound for $5 billion in revenues by 2025, and so these new financial announcements touch on rulings for continued growth and regulation in the sector.
What’s on the cards for the gaming industry in 2023?
With its rollercoaster ride of a year, many are still left questioning what the current status is for the gaming industry in the year to come, so let’s explore further.
Draft amendments to online gambling regulation
The Ministry of Electronics & Information Technology is now the government department who have control of the online gaming industry and will be the main driver of any changes in regulations that affect online gaming. At present, there are draft amendments to the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 in relation to online gaming, on the table.
The amendments seek to address harm as it relates to online gambling, as well as further tightening to ensure that industry operators comply with Indian laws. The amendments were drafted after careful consideration with ministers, stakeholders, and other associated parties. It is of note that in the amendments that online game refers specifically to users “if he makes a deposit with the expectation of earning winnings.” This is an interesting part to keep in mind, considering the number of no deposit offers at gaming websites around the world. Online gaming intermediaries are also up in the amendments, in regards to KYC, verifiable licensing, and tightening of compliance requirements.
On taxation in gaming
Despite the Goods and Services Tax Council spending time on gaming in regard to games of chance and skill, there is still no consensus in this space as yet. The budget and proposed finance bill offer no further insights into whether there is an end in sight to the debate.
Furthermore, several ministers constituted by the council are still in talks on whether GST should be imposed at 28% irrespective of whether they are games of chance and skill. This is quite a gap from the current 18% rate being levied on online skill-based games. It is also being debated whether the tax base for the GST should be applied to the whole deposit amount or to the brokerage fee. In any case, it is becoming increasingly clear that those who wish to play at online casinos should certainly register with operators offering no deposit bonuses to their players.
In other tax dealings, the Finance Bill outlines further tax proposals that would directly affect the gaming industry. One is that Tax Deduction at Source (TDS) would be applied to total winnings of over 10,000 rupees in a year. This is to address a current loophole where winners cash out winnings in multiple transactions to avoid paying the tax. TDS is applied on all betting and gambling winnings which presumably includes online gaming.
There is also a special new section in the proposal, 194BA, which relates to the TDS as it applies to online games. This is due to come into effect on July 1st, 2023. For winners, it means that they would have to verify to the online gaming provider, before a cash out, proof that the tax has been paid on their winnings over 10,000. While there is still a lot to sort out in regard to how this will all work in practice, it can be assured that the Indian government will be looking to close as many tax loopholes within the industry as possible.
What else is in the Budget?
The budget aims for a total federal spending of no less than 45 trillion rupees, a rise of 7.5% over the previous year, and widely in line with economic growth. This includes capital spending of 10 trillion rupees, which reflects growth of over 30%. These are various tax proposals on the table, with an income tax rebate to meet incomes of Rs 7 lakhs, and tax of 30% above 15 lakhs.
Within other spending goals, there are tasks to spend 350 billion in energy transition activities, invest in 100 infrastructure projects, and add 50 additional air traffic assets. People have praised increases in spending to both the education and health sectors, to support a growing population.
Despite the fact that much of the rest of the world is seemingly in an economic downturn, projections for the Indian economy look fairly bright. It’s good news for both the government as well as the general population, as it points to strengthening in the region and a bigger place on the world stage.