Challenges and opportunities in the Indian gaming industry

Frank Chen May 5, 2024

SiGMA news

Challenges and opportunities in the Indian gaming industry

The Indian gaming industry is currently navigating a complex regulatory landscape, presenting both obstacles and avenues for growth. From taxation policies to legal uncertainties, the sector is at a pivotal moment, with stakeholders grappling to address various issues.

Regulatory landscape: A complex terrain

India’s online gaming market is vast but legally uncertain, lacking direct regulations. Additionally, the Indian government recently raised the Goods and Services Tax (GST) levied on this industry from 18% to 28%, aligning it with the “sin tax” on horse racing. This form of taxation could lead to downsizing, and layoffs, and potentially deter foreign direct investment.

In regions like Goa, a popular gaming destination, authorities impose a 28% GST on bets. However, many casinos, predominantly operating on cruise ships, exploit loopholes to circumvent these taxes. This practice, though profitable, poses challenges for new entrants and adds to the regulatory ambiguity.

The role of skill-based and non-skill-based games

Moreover, in India, games are categorized into two types: skill-based games and non-skill-based games. This distinction does not resolve all issues, as many games involve a degree of both skill and chance.

Skill-based games, such as Rummy and Fantasy Sports, are recognized as depending on skill over luck and can therefore operate legally outside gambling bans. However, non-skill-based games, such as Teen Patti, known as the Indian version of “Flash,” cannot be directly presented as real-money games due to their non-skill nature, but the unclear regulatory stance allows manufacturers to monetize through virtual coin-to-cash conversions and high turnovers.

Addressing regulatory challenges for industry growth

The Indian gaming industry stands at a crossroads, marked by challenges and opportunities. Addressing regulatory complexities is paramount to fostering its healthy development. One potential solution lies in formulating specific laws to regulate online gambling, including clear distinctions between skill and chance games, coupled with appropriate taxation. Collaboration with overseas gambling platforms could also ensure compliance with Indian laws, safeguarding consumer rights and fostering industry growth.

As India’s gaming sector continues to evolve, policymakers must navigate the regulatory maze to unlock its full potential, ensuring a fair and thriving industry landscape.