[Opinion] Online Gaming: Game is still on under GST

DS Mahajani – [2022] 144 taxmann.com 208 (Article)

Introduction

With advent of technology, availability of uninterrupted internet and smart mobile phones clubbed with series of lock-down during the recent pandemic gave early birth of Online Gaming industry India. Online Gaming is latest and youngest entry in the world of technology. Online Gaming is seen as disruptive market considering the size and scale across the world.

The market size of global Online Gaming estimated at USD 196 Billion in 2021 and is expected to reach USD 221 Billion in 2022. With CAGR of 13% from 2022 to 2030 the revenue of Online Gaming is expected to be USD 584 Mn by 2030.

India currently has more than 400 Gaming companies and 420 Million online gamers, second only to China. The Game users are projected to increase from 420 Million to 657 Million in 2025 – which is over 50% increase. The Indian online gaming industry is growing annually at 30% and is one of the fastest growing segments on digital media and entertainment sector.

In this growing sector, Dream11 (owned by Dream11 Fantasy Private Limited), Mobile Premier League and Games24x7 are three Gaming Unicorns of the Country. Dream11 is one of the most popular fantasy apps globally, with nearly 10 crore users on its platform.

Unlike other games/sports, online gaming does not have any regulatory framework in India. In absence of the same, Indian gaming Industry have made their self-regulating associations/bodies like Federation of Indian Fantasy Sports, Indian Federation of Sports Gaming, All India Gaming Federation, Online Rummy Federation and Federation of Electronic Sports Associations of India to name a few.

What is Online Game, and How does it Function?

Online games refer to games that are played over some form of computer network, most often the Internet. Online games can range from simple text-based games to games incorporating complex graphics and virtual worlds populated by many players simultaneously. There are variety of games from existing outdoor games like cricket, football, kabaddi, basketball and hockey etc to indoor games like Rummy played in a virtual mode – mostly on mobile phones. In India, after Rummy, Cricket is one of the most played online games, as Cricket is another religion of our Country. And Cricket is the main reason for making Online games more popular in India.

Under Online Gaming, the gaming company charge from the payer/participants an amount which has two elements – one Platform Fees or Entry Fee, which is about 15% to 20% of the amount collected. The balance amount collected from each player/participant is pooled in as Escrow Account which ultimately gets distributed amongst the players /participants as Prize Money or Pot Money immediately upon conclusion of the game.

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