What India Can Learn from Global Market to Unlock Its $60 Billion Gaming Potential A joint report by the United States India Strategic Partnership Forum (USISPF) and TMT Law Practice states that India's stance on a high tax rate- for all formats on the total deposits made by players- differs from that of the standard global practice

One year after India implemented the much-concerned 28 per cent Goods and Services Tax (GST) rate on online gaming, casinos and horse racing, the gaming market continues to be well on track to become USD 60 billion by 2034.

In July 2023, the GST Council in its 50th meeting, recommended a uniform 28 per cent GST rate on the full-face value of bets placed /chips purchased in casinos, horse racing and online gaming. Major gaming market have skill-based games taxed on platform fees or Gross Gaming Revenue (GGR), ranging from two per cent to 25 per cent.

A joint report by the United States India Strategic Partnership Forum (USISPF) and TMT Law Practice highlights India's stance on a high tax rate- for all formats on the total deposits made by players- differs from that of the standard global practice.

That hasn't diminished the enthusiasm in the country. Notably, the foreign capital inflow has been on the rise with the US being a major patron. The government is considering allowing 100 per cent foreign direct investment (FDI) in the online gaming sector.

Mukesh Aghi, President and CEO, USISPF, said, "The US has been a significant contributor to India's gaming sector, accounting for USD 1.7 billion of USD 2.5 billion in FDI. This reflects the immense confidence global investors have in India's rapidly growing gaming market."

"The FDI underscores the growing confidence in the future of the gaming industry of India that was considered as a mere timepass for people, so we have seen a massive evolution in the gaming sector," said Parth Chadha, CEO and co-founder, STAN.

This underscores India's growing appeal as a global gaming hub. Notably, 90 per cent of the FDI flows in for the pay-to-play segment, which also accounts for 85 per cent of the sector's overall valuation.

Taking a Page from Global Gaming Market

India is home to 442 million online gamers, the second-largest base globally after China. The gaming industry has gained momentum in recent years with start-ups securing a funding of USD 2.8 Bn from global investors in the last five years according to Invest India.

Despite the growth, Indian policies can take note of other markets' practices. For the uninitiated, the rate applies irrespective of whether these activities involve games of skill or chance. The report states that applying a one-size-fits-all approach— blurring the difference between online games of skill with games of chance (or gambling) — has stunted India's growth.

Aghi further clarifies, "For Indian companies to compete on a global stage, we need a level playing field with progressive tax and regulatory policies that align with international standards."

Other key markets such as the US, Germany, the UK, Denmark, and Belgium, make a clear demarcation between the two formats. Several countries have created Fantasy Sports as a distinct category within games of skill and regulate and tax them separately, the report added. Case in point- the United Nations Central Product Classification (UN CPC), the global taxation framework provider, distinguishes between online gaming and gambling.

"Notably, skill-based games receive unique treatment in all the 12 countries, treating them as a separate, standalone category. The tax rates for skill-based games are generally lower than those for games of chance," the report said.

Chandrahas Panigrahi, CEO and co-founder, Lets Game Now feels that while challenges like regulatory complexities exist, they are navigable. "With a current market value exceeding USD two billion and projections to nearly quadruple by 2027, the industry has the potential to create around 60,000 new jobs and boost India's digital economy. We can unlock vast opportunities that will impact multiple sectors across the nation by encouraging collaboration and building a stable ecosystem," he said.

"A more nuanced regulatory and taxation regime, similar to those adopted in global markets, would not only provide clarity but also foster sustainable growth in the online gaming sector," said Abhishek Malhotra, partner, TMT Law Practice.

The report calls for a more nuanced regulatory and taxation regime (like other markets) and seeks a clear distinction between games of skill and those of chance for taxation and regulatory purposes. This approach, the report suggests, will support the sector's growth.