ONLINE GAMING (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     9th January 2024        
output themes

Context: The Supreme Court will shortly commence the final hearing of multiple cases between tax authorities and the online gaming industry over tax demands adding up to nearly ₹1.5 lakh crore.

  • Gaming companies argue that the 28% tax should be applicable only from 1 October, but the government contends that the revision clarified an existing law, and, thus, its demand for tax dues was not retrospective.

Size of the Gaming Industry

  • India’s gaming industry is expected to become a $5 billion industry by 2025, growing at a compounded annual growth rate of 28-30 per cent.
  • The real-money gaming segment generated over 10,000 crore in revenue in 2022.
  • Currently, online gaming companies pay the government a GST of 18 per cent levied on the Gross Gaming Revenue (GGR) or the platform fee. Besides this, TDS of 30 per cent is deducted on the winnings. 

Regulation of Online Gaming in India

  • 7th Schedule Empowerment: The Constitution of India grants State governments the authority to legislate on matters related to betting and gambling through Entry 34 and on sports through Entry 33 of the State List in the Seventh Schedule.
  • Limitation on State Legislation: While States can legislate on betting, gambling, and sports, they lack the jurisdiction to legislate on games of skill, as these are distinct from activities falling under the ambit of games of chance.
  • Judgements on Online Gaming: Various court judgments affirm the legality of betting on games of skill, distinguishing them from games of chance. 
  • This aligns with the constitutional protection provided under Article 19(1)(g) and Article 21 for playing online games and sports of skill.
  • State Authority: States are vested with the power to enact laws and regulate gambling activities, including betting on the practice of gambling.
  • Legal Entity Requirement: Any online gaming platform, whether domestic or foreign, that offers real money online games to Indian users must be a legal entity incorporated under Indian law.
Samadhaan