The Indian Gaming Industry has been rapidly growing in recent years. According to India Times Article, there were 421 million online gamers in 2022, 8% more than the previous year, 2021. The numbers are predicted to increase to 422 million in 2023. In a recent interview with Mukesh Ambani and Satya Nadela, Mukesh Ambani said that The Gaming Industry would become more significant than movies, TV Shows and music.
What is Fantasy Sports Gaming?
Fantasy Sports Gaming is a type of online game where you make a virtual team of real sports players according to the player’s points; the points are mainly based on the real-life performance of a sports player. Participants make the team according to their deep knowledge and skills in sports. The platform has different kinds of options in sports games like Kabaddi, Football, Cricket, Basketball etc.
A Participant can enter the contest in two ways: a Free Contest and a Paid Contest. Games like Mycircle, Dream 11, and MPL are the most prominent players in the industry. These types of games mainly earn from Paid Contest.
There are two levels in Paid Contests Macro and Private. Fantasy sports games mainly earn from platform fees, like when you participate in any paid contest; they charge a Platform fee of 15-20% on total prize pool.
What are the New Tax Rates for Fantasy Sports Gaming?
Recently The Indian Government announced new taxation rules for fantasy sports games. Until now, whenever you enter the paid contest, you must pay 18% GST and A Platform Fee. But according to the new rules, Players now have to pay 28% GST and Platform Fee, and if you win, you will have to pay 30% TDS on the winning amount.
For example, Suppose you deposit Rs. 100 in the game; on that amount, you will be charged 28% GST means now you have only Rs. 72 and if you win some amount from the contest, like Rs. 150, now on winning amount you have to 30% TDS so your net profit is Rs. 105.
As per the recent GST Council meeting, the GST only applies to First Deposit, and the new taxation rules will be applicable from the 1st of October.
Is it applied on both Normal Online Games and RMG Games?
Most of the News Channels claim that the new tax rules apply to whole online gaming, but this is not true; Online Gaming is the parent category. Many subcategories come under this, like Battle Royal Games, MMORPG Games, etc.
Real Money Games mainly come under I-Gaming, the subcategory of online gaming, and the new Tax Rules are only applicable to I-Gaming Category; regular online games remain the same rules as before.
When the Government announced the new tax rules, 40+ plus gaming companies like Encore Games, Outlier Games etc., wrote a letter to the Government not to mix Normal Online Games and Real Money Games.
After that, The Government clarified that the new taxation only applies to games in which players pay some amount, and on behalf of that, they win prizes in the form of money.
On the other hand, regular online games consist of Microtransactions through which players buy different types of skins and outfits. There’s no sort of money prize.
Is it really Destroy Fantasy Sports Gaming?
According to the 50th council meeting, the Government decided to keep the 28% tax rate on real money games. After that, many well-known companies, like MyCircle11, and Dream 11, stated that these new taxes would eradicate the industry.
According to the council meeting, the Government will review The impact of increased tax rates after six months from the implementation date, and after that, they will make changes as per the outcome.
According to the All India Gaming Federation, the decision is unconstitutional and irrational, as the companies do not have margins of more than 20%, so the small or new startups will get closed in 6 months.
The same kind of thing was seen in the cryptocurrency case. First, the Government regulated the currency, then suddenly, they increased the tax rates, and many users were moved from the cryptocurrency market.
According to the Times of India Article, these new taxations will reduce companies’ and players’ earnings and players will be less engaged in online gaming. Low earnings make it challenging for companies to attract new users, which is crucial for business growth.
Government Should have to Make a proper Framework
All the betting, Horse Racing, and Casino games lie under the grey category, Which means there’s no proper bill and framework designed for these games. The Government should introduce a proper framework for real money games instead of just increasing taxes.
They should develop a balanced tax structure so companies can grow. Both industry and Government should work together and develop a structure that promotes a sustainable and safe gaming environment for the player, which will directly benefit the country’s economy, industry and users.
The gaming industry is one of the biggest industries in the world. After Bollywood, there’s no doubt that Gaming will be the upcoming most significant industry in India, which will create almost 3 million employment, so the government should have to make decisions carefully on these critical points. It should have to introduce a properly well-structured Framework.
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