Karnataka IT Minister Criticizes Centre's Gaming Policies, Predicts Job Losses

Karnataka's Minister for Information Technology and Biotechnology, Priyank Kharge, has expressed strong opposition to the recent regulatory actions imposed by the Centre on the Indian gaming industry. Kharge labels the government's demands as unrealistic and unreasonable, potentially leading to job losses and a migration of gamers to Chinese and European gaming platforms, where they may face duplicitous practices.

Kharge's critique is likely directed at the Centre's decision to impose a 28% Goods and Services Tax (GST) on the total value of bets for online games, irrespective of whether they involve skill or chance. The move, announced by the GST Council in July, replaces the previous 18% GST levied on the platform fee for skill-based games. Additionally, a 30% Tax Deducted at Source (TDS) is now applicable to the annual earnings of online gamers.

Kharge emphasizes the significance of India's online gaming sector, comprising 1,400 startups with a valuation of INR 1,60,000 Cr in the real money gaming (RMG) segment. He highlights the contributions of in-game purchases and deposits, amounting to INR 8,370 Cr through UPI transactions. According to industry estimates, the RMG sector is projected to contribute INR 6,500–INR 6,800 Cr in corporate tax and TDS to the exchequer between FY24-28, with an estimated GST contribution of INR 76,000 Cr during the same period.

In a tweet, Kharge underscores the growth potential of the gaming sector, with a market size expected to reach INR 33,243 Crore in the coming years. The sector currently employs around 1 Lakh individuals, with the potential to expand to 2.5 Lakh job opportunities by 2025. He emphasizes the sector's role in attracting investments, fostering innovation, and generating employment for the nation.

Since the implementation of the new GST regime on October 1, the RMG industry has witnessed a significant impact on revenue and user spending. Online poker platforms, followed by rummy platforms, are reportedly the most affected by these changes. Industry experts suggest that RMG platforms may consider selling off their assets due to regulatory actions, posing challenges to the growth of the gaming sector.

Despite concerns, a recent report indicates that the government has recorded a Tax Deducted at Source (TDS) collection of approximately INR 600 Cr from online gaming in the current financial year. The ongoing debate underscores the need for a balanced approach to regulatory measures that can sustain the growth of the gaming industry in India.