In March 2022, PM Narendra Modi exhorted the country to unlock the potential in online skill-based (OSB) gaming and some other sectors to make us a global leader in the field AVGC (audio, visual, gaming and comics). This had also been highlighted in the FM’s budget speech a month earlier. Hence, the decision of the GST Council to levy a whopping 28% tax on OSB gaming (that too, on the total revenue instead of on their platform fee, the retained revenue) is an absolute shocker and probably sounds the death knell for many in this highly promising nascent sector.

OSB gaming has hundreds of young and highly skilled entrepreneurs, who have created a veritable hotbed of innovation—with a $20-billion valuation, $2.5-billion revenue, providing $1-billion annual revenue to the exchequer and enabling lakhs of direct and indirect jobs. Moreover, India being a ‘Mobile-First’ nation, the OSB innovators have made skill-based gaming fully accessible to the market. Clubbing OSB gaming with betting and gambling, like the GST Council has done, is grossly incorrect and out-of-sync with the Supreme Court’s ruling. OSB gaming is, actually, a modern, highly sophisticated, technology-based skilled pursuit and often used as a training tool for Management.. The GST decision is a beautiful example of economist Keynes’ lament that “The difficulty lies, not in the new ideas, but in escaping from the old ones that ramify into every corner of our minds”. 

Thus, the GST Council appears to have erred with the age-old ideas of betting and gambling having ramified themselves too deeply and led to such wrongful decisions as that of 28% tax on the sunrise sector. With the committed goal of the nation to be a global powerhouse through Digital India, we can ill-afford to adopt approaches such as these toward technology-linked activities.  India is on the verge of carving out for itself the numero uno slot through its innovations in OSB gaming. The prime minister has consistently been indicating support and encouragement for this young sector. At Toycathon 2021, he urged innovators to “Create interesting and interactive games that engage, entertain and educate”. He also encouraged game-makers to focus on exporting India’s capabilities and culture to the world, like South Korea has done over the past few decades. India is among the top 5 markets in the world when it comes to mobile gaming. As per one estimate, this sector is expected to reach Rs 3 trillion by 2024. 

There is a very bright chance, given our country’s talent to innovate, to ‘Create in India and Brand in India’. Budget 2022 had referred to a creation of a task force for making India the global games developer and gaming services hub in the world. Even Toycathon 2023 has the theme of ‘Promotion of Innovating Ideas, revival of local heritage’. Viewed against such consistent policy direction from the top, the rather retrograde proposal of 28% GST seems like a flip-flop.There is tremendous pride in India being a global benchmark on 5G rollout. However, it is important to realise that 5G utilisation is equally or more critical. The role of OSB gaming is of paramount weightage here because it is one of the most powerful draws—a great turbo-charger for the consumption of 5G.

Unfortunately, there is now much rejoicing and celebration amongst the black market operators, especially illegal offshore gambling websites. The killer tax on the legal domestic OSB operators would be a tremendous boost to these illegal players not subject to any taxes and not subject to any other regulatory actions of MeitY. Obviously, such black market operators pose a great threat to the national security and sovereignty of the country. OSB gaming is probably an economist’s ideal, being a technology-based industrial sector featuring perfect competition with as many as 800 players in the same market. There is no other highly-skilled technology market in India with so much competition. 

There are also no entry barriers and a very wide choice of innovative products and services available to customers—the gamers. This sector, which attracted about $1.7 billion investments in 2021 and Q1 of 2022 alone, is truly one of the great attractors of foreign and domestic investments and a powerful booster of the economy. However, the proposed ‘killer’ tax would be a very powerful deterrent to future investment and could lead to the exit of hundreds of entrepreneurs from the sector. It is indeed rather disheartening to see the crippling of such a promising sector in Digital India. It is fervently hoped that the powers-that-be review the step and maintain India on its trajectory to world leadership in OSB gaming.