From lower tax slab to 5G accessibility: What gaming sector expects from Budget 2022

The gaming industry is also hoping for a progressive policy structure from the government along with 'fair' treatment from the GST council

e4m by Shantanu David
Published: Jan 27, 2022 8:38 AM  | 7 min read
Budget 2022

The Union Budget 2022 will be presented on February 1 by Union Finance Minister Nirmala Sitharaman amid the third wave of Covid pandemic. Many Covid-hit Indian sectors are already reeling under a slowing economy. However, the gaming and esports market has emerged as one of the many sunrise industries in India. The gaming industry in the country has highlighted the multi-faceted opportunities for a range of businesses, venture capitalists, start-ups, multimedia marketing. It has attracted a large and highly adaptable pool of techies, developers, professional gamers, influencers and entrepreneurs, apart from people who actually play the games.

This is the main reason why all of the sector’s stakeholders’ eyes are on the upcoming Budget. One of the biggest issues for the sector is that of GST. The expectations are high for sorely needed regulation for the nascent industry that is blooming rapidly.

Roland Landers, CEO, All India Gaming Federation said, “The online gaming industry is growing at an impressive CAGR of 25% - 30% and holds significant potential for overall economic growth, job creation and contribution to the government's vision of a trillion-dollar digital economy by 2025. To enable the industry in realising its peak growth potential, it is imperative that the GST regime for the online gaming industry is kept rational and at par with other technology platforms and services.”

He adds, “It is important to highlight that regressive taxation of these emerging sectors may only make the business unsustainable in India. Our recommendation is that the tax authorities should align its policies with internationally accepted principles of taxing the online gaming sector and provide certainty to the industry.”

With respect to the user base, the casual gaming market in India has 420 million users, according to a June 2021 report by KPMG. Evaluated at $98 billion in 2020, the mobile gaming market is expected to reach $272 billion by 2030, at a compound annual growth rate (CAGR) of 11 percent. Another industry study, the CII BCG Big Picture Report 2021, noted that the domestic Media & Entertainment industry is expected to grow to $55-70 billion by 2030 at 10-12% CAGR, largely propelled by the high-volume growth OTT, Gaming, Animation, and VFX. Within 2022 itself, the advertising sector in India is set to regain its pre-pandemic figures with ad revenues expected to add up to $10-10.5 billion for the year.

"The Indian gaming industry is one of the fastest-growing industries in India from a new age technology perspective currently. As per the report launched by the EY- AIGF in 2021, online gamers are estimated to grow from 360 million in 2020 to 510 million by 2022. Moreover, the initiative of the Government of India that promotes internet access to citizens at affordable rates and smartphone penetration has been a game-changer for this industry,” notes Ankur Singh, CEO & Founder of Witzeal Technologies Pvt. Ltd.

Singh added that the industry has now realized its full potential for growth in upcoming years and now expects to focus on this sector as it will further help in keeping with the government's objective of generating unicorn start-ups and act as a catalyst to contribute immensely to the 5 trillion economy target by 2024-25.

Bhavin Pandya, Co-founder & Co-CEO, Games24x7, highlights the fact that the rise of the gaming sector also benefits the growth of other sectors that are the focus of the government including semiconductors, fintech, telecom and IoT (Internet of Things). There are further implications as well.

Pandya observes, “Gamification is increasingly used to improve education, training, and skill development. Established players in the online gaming sphere have the wherewithal to support a variety of professions from budding entrepreneurs to established technologists and data scientists which will further accelerate growth and make India an exporter of gaming content and IPs. The sector eagerly awaits progressive policy structure from the government as well as fair treatment from the GST council. With proper support, the online gaming sector can give a big impetus to the government's drive to create a USD 1 trillion digital economy.”

India is a mobile-first country with vast numbers of first-time mobile users accessing the internet on their smartphones. The market forces are also propelling companies, ranging from smartphone manufacturers to professional gaming tournaments, to concentrate on that particular segment.

Sai Srinivas, Co-Founder and CEO, Mobile Premier League (MPL) hopes that the Government of India will introduce measures to adequately support this next phase of growth. Online skill gaming companies, which have flourished amid ever-increasing investor interest, are well-placed to create jobs in roles ranging from VFX designing to software development.

“The Budget should consider levying a lower tax slab than the existing 18% to aid this. With esports a medal event at the Asian Games, and continues to gain prominence, this will also help incentivise a greater number of professionals to get into esports and represent the country at global tournaments of this stature,” Srinivas says.

Expecting minimum taxation costs from the Budget this time, Abhishek Aggarwal, Co-Founder & CEO, Trinity Gaming, said, "We definitely depend a lot on direct investments and these investors play a crucial role. We hope they can suggest minimum taxation costs for this segment to attract more investors. It would be a favourable step to support the gaming community as well, as they seek various brand collaborations. Secondly, if 5G services could be made more accessible and pocket-friendly, that would be greatly appreciated".

Srinivas further added this can be achieved by establishing specialised AVGC Centers and Universities for talented designers, visual artists, and developers who may have the capabilities but not the resources to build world-class games. He concludes, “Lastly, we hope that this year will bring more clarity from a regulatory standpoint. Online skill gaming suffers from a lack of differentiation from prohibited categories and games of chance. A uniform policy will be welcome and provide much-needed stability to the sunrise sector.”

Lokesh Suji, Director, Esports Federation of India & Vice President of the Asian Esports Federation (AESF), elaborates, “We are hoping the budget to be in favour of the video games industry, tax benefits should be given to the gaming cafes where aspiring gamers kick start their career. Mostly the types of equipment that are used by our esports athletes are imported or otherwise have high duties, so a tax redemption will be a good step to take gaming to the next level. The prize pool winnings of our esports athlete should be exempted from Income tax just like any other sportsperson.”

Sunil Yadav, CEO, PlayerzPot, concluded by saying that the gaming sector has huge potential to change the way the youth thinks today and hopes for transparent regulations from the Union Budget. "The sector has the potential to transform the way the younger generation learns, consumes content, and gets entertained. We look forward to transparent and progressive regulations that clearly differentiate games of skill from those of chance. During or after covid-19 lockdowns, the Indian gaming industry needs stable regulations with national guidelines to achieve its long-term sustainability and competitiveness on a global scale. In an answer to the same, NITI Aayog has already proposed setting up a self-regulatory body for online Fantasy Sports, along with a framework of possible rules and standards for the sector. We also look forward to standardization among accounting and financial practices", Yadav added.

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