From Dr. Aruna Sharma, Practice Development Economist and Director General of Retd, GoI
Can you provide some insight into the current market potential of iGaming in India and what are the key challenges you expect the industry to face in the near future?
In India, the popularity of online gaming as a form of entertainment has skyrocketed due to the proliferation of cheap smartphones and affordable internet access. Investors, developers and other industry players across the world are excited about the Indian online gaming industry, which recorded a CAGR of 28% between FY2020 and FY2023 and holds a market valuation of Rs 16,428 billion. We are keenly watching the growth story of.
However, the online gaming industry does not directly contribute to India's economic growth, but rather in terms of increased revenue (direct and indirect taxes) collections (YoY). Additionally, the sector has attracted up-and-coming technology developers and entrepreneurs, providing employment opportunities and fostering innovation to meet the growing demand for AI and other immersive gaming experiences. I did.
After significant and clear changes in government regulation and tax policy in 2023, iGaming can expect the clouds over the accelerated growth of iGaming in India to thin in 2024 . 2024 is a promising year for iGaming in India. Full regulation may take time, but positive court rulings and increased attention to the non-RMG segment could spark a casual gaming boom and open up a multi-billion dollar market. However, regulatory uncertainty and potentially high tax rates remain obstacles to attracting investment and other stakeholder interest in this growing market and industry.
What are the main challenges facing iGaming in India and how do these challenges differ in each region of India?
- The government has focused on mitigating threats such as misinformation, mental health issues, money laundering, and financial loss of users by introducing rules and regulations such as IT Rules and establishing SROs and SRBs. I am putting
- Appropriate business-friendly regulations are needed to protect Indian players first. Because in the current situation, Indians are being abused by countless nefarious parties. Strengthen mechanisms to check and curb illegal gaming platforms and ensure increased awareness and behavior of users who are into online gaming.
- A pressing issue that the government needs to address immediately is to introduce parameters that distinguish games of skill from opportunities for taxation.
- In the aftermath of high retroactive taxes, the industry faces job losses, cuts in advertising and spending, and reduced investment in research and innovation.
Additionally, platform policies and regulatory compliance are becoming increasingly complex as both central and state governments legislate on the same subject and multiple ministries regulate the industry.
We explore the need for a balanced and adaptable regulatory framework.
An unregulated framework with a large user base will lead to the proliferation of iGaming in the gray market with all its vices. By regulating the iGaming industry, governments can derive other positive outcomes, such as increased tax revenue, economic growth by attracting more foreign investment, job creation, and increased consumer protection. A thorough regulatory framework allows transparent parameters to distinguish games of skill and license them accordingly, classifying breaks as games of chance.
Regulation always brings transparency and ensures there is no misleading advertising or non-payment of statutory taxes. Additionally, regulations such as the IT Amendment Rules, 2023 have established a robust grievance redressal mechanism with the establishment of SRBs and SROs.
Furthermore, with a balanced and stable regulatory framework, international iGaming companies have the assurance that they will pay taxes, create jobs, and invest in countries and people while doing business in a regulated and transparent market. You can gain confidence. Therefore, the current iGaming environment requires comprehensive regulation to facilitate business and protect Indian players who are being abused by countless nefarious actors.
As a result, legally operating foreign iGaming companies have consistently called on the Indian government to establish an appropriate and stable regulatory and tax regime. Instead, governments have consistently and wisely chosen to ban it, driving the entire industry underground as a result. Additionally, iGaming companies face unjustified persecution and baseless lawsuits from India.
A new 28% GST on online gaming has divided opinion on the future of the industry in India. How did the industry react to that?
The industry initially panicked over the 28% tax rate, fearing slower growth and less investment. Partial relief and regulatory compliance clarity provided cautious optimism. Small and medium-sized businesses remain anxious, worried that high interest rates will continue to discourage players and favor larger companies. The long-term impact will depend on pending Supreme Court rulings on gaming classification and potential adjustments to the tax structure.
The application of a flat 28% tax on the total amount wagered on online games, whether games of skill or luck, reflects the evolution of consensus principles among SROs and oversight by SRBs. This turned out to be a miscarriage of what had been progressing smoothly. There is a clear distinction between game of skill (licensed games) and game of chance regulatory bodies.
The issue is currently being considered by the Group of Ministers (GoM) comprising officials from ministries such as the Ministry of Home Affairs, Ministry of Finance and Meitei, and how to combat GST and money laundering and other similar episodes of fraud and fraud. is being reconsidered.
Finally, what can we expect from this year's Indian iGaming overall in three key takeaways?
Set the pace by instilling a more stable policy environment so that 2024 brings clarity in rulemaking and consistency of rules, ensuring that India does not miss the bus of becoming a hub for developers. is expected. The iGaming industry is expected to step up its efforts to bridge the digital divide, enable the learning of cognitive skills, and strengthen conscious citizen messaging to further leverage the positive aspects of iGaming.
Additionally, the iGaming industry should leverage technologies such as blockchain to further the objective of transparency and tracking of digital payments as a technological solution and to permanently preserve records to curb money laundering. . Alongside the formulation of regulatory policies, stricter enforcement of policies such as IT rules (establishment of SRB), mandatory KYC and compliance with Advertising Standards Council of India (ASCI) standards for the iGaming industry in a safe and secure manner. Must be inculcated to ensure a secure gaming platform.
The future of the gaming industry promises growth, but a lack of market regulation and disruptive policies is causing international iGaming companies to shy away from India, sending an unwelcome signal to many other potential foreign investors. There is still a risk of sending .
