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Context:

The Indian online gaming industry is described as a sunrise sector with incredible growth potential.

About Online Gaming

India has more than 650 million smartphone users and half the population are under 35, the country possesses the demographic foundation to become a global gaming powerhouse.

Economic potential:

• Market size reached ₹33,000 crore in 2023 and is projected to double to ₹66,000 crore by 2028, growing at a compound annual growth rate (CAGR) of 14.5% .
• The industry has created 2 lakh jobs and could generate an additional 2-3 lakh direct and indirect employment opportunities in the coming years .
• Three gaming startups have achieved unicorn status, demonstrating the sector's innovation potential.
• Global investors have injected USD 2.8 billion into Indian gaming over the past five years.

Regulatory Challenges

The Union government has imposed a 28% GST on online gaming, this high taxation, combined with retrospective demands, creates several challenges:

• The Union government's retrospective GST demand of ₹1.12 lakh crore has prompted a Supreme Court stay order.
• The tax burden threatens smaller startups with bankruptcy and creates unanticipated liabilities for businesses.
• The GST Council has not provided clarity on tax demands for the period from 2017 to 2023, whih created continuous uncertainty.

Some state governments have imposed bans on online gaming, wrongly classifying skill-based games as gambling:

• Courts have overturned these bans, and ruled that "games of skill" are legal and cannot be classified as gambling .
• The legal challenges wastes government and industry resources and creates an unstable business environment.

Impact of Current Regulations

• Smaller startups face existential threats from tax demands and high compliance costs.
• The sector may see increased activity in illegal gambling and betting sites.
• Global investors may hesitate to commit capital investment due to regulatory uncertainty.

Way Forward

The Economic Survey 2024-25 calls for accelerating deregulation to promote business growth.

Rationalizing GST rates to align with other digital services.

Establishing a dedicated regulatory body to manage the gaming ecosystem.

Developing a comprehensive code of ethics to ensure player protection and platform accountability.

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Source: 

THE HINDU