Gaming Law Update: Recent GST Hike Disrupts India’s Online Gaming Sector

The Indian online gaming industry is facing a significant downturn following the recent implementation of a 28% GST on total deposits, effective October 1, 2023. A joint report by EY and the US-India Strategic Partnership Forum reveals that over half of surveyed companies have experienced revenue stagnation or declines, with some reporting losses of up to 50%. The tax hike, which replaced the previous 18% GST on gross gaming revenue, has not only strained revenues but also led to severe job cuts one-third of companies have reduced their workforce, with some halting hiring or shutting down entirely.

This move has sparked calls from industry stakeholders to shift the tax base to net deposits and reconsider the rate, with many suggesting an 18% GST to mitigate the impact. Experts argue that taxing platform fees instead of total deposits would better reflect the value of services provided, fostering growth and reducing revenue leakage. As the sector struggles to recover from these recent changes, the need for a balanced and sustainable taxation strategy is becoming increasingly urgent.

Stake.com Violates Indian Laws with GPay, Aims for $100M in Bets for IPL 2024

Stake.com, an illegal betting platform, has started accepting deposits in Indian rupees and enabled GPay payments ahead of IPL 2024, with hopes to reach $100 million in wagers. The platform is violating Indian laws by offering betting services despite gambling being illegal in the country. Stake.com’s aggressive marketing and use of mule accounts to facilitate payments are also raising concerns. The Indian government has mandated offshore betting sites to register under GST laws, but no such site has complied yet. This comes after other major operators like Betway exited the Indian market due to the 28% tax regime.

Google’s Decision on Fantasy Sports Apps Draws Criticism from AIGF

Google has extended the grace period for fantasy sports and rummy apps that participated in its pilot program in India, prompting objections from the All India Gaming Federation (AIGF). AIGF’s CEO criticized Google for limiting the program to certain games, which they argue is an anti-competitive and discriminatory decision. The federation also expressed concern about Google’s control over the app distribution market and the lack of an inclusive policy for skill-based Pay-to-Play games. They are calling for regulatory action to ensure fair competition in the sector.

SportsBaazi Sees 100% Revenue Growth During IPL 2024

SportsBaazi, a sports gaming platform, reported a 100% revenue increase during IPL 2024 compared to the previous year. The platform also experienced a 1.5x boost in user engagement during the T20 World Cup. The average time users spent on the platform more than doubled, with popular fantasy picks including Virat Kohli, Jasprit Bumrah, and Travis Head. The platform’s CEO, Saurabh Chopra, attributes this growth to a transformation in the Indian online gaming ecosystem and ongoing investment in skill-based sports gaming formats. The platform also launched a Sports Gaming Champion leaderboard to boost engagement across three gaming formats.

LightFury Games Opens Studio in Bengaluru, Targets AAA Game Development

LightFury Games, a startup focused on high-quality gaming, has opened its first studio in Bengaluru, marking a significant step in its expansion. Backed by an $8.5 million seed investment, the studio aims to develop AAA mobile games, with plans to eventually move into console platforms. The company is led by industry veterans, including Karan Shroff, and has plans to expand internationally with additional studios in the UK. The launch comes at a time when India’s gaming market is booming, with projections indicating the sector will surpass $1 billion in revenue by 2025.

Government to Set Up Panel to Ensure Compliance by Online Gaming Platforms

India’s government is set to form an inter-departmental committee to oversee regulatory compliance by online gaming platforms. The committee will include representatives from various departments, such as ED, RBI, and consumer affairs, to address concerns around tax evasion and compliance. The government is also making it mandatory for overseas online gaming operators to register under GST laws, with punitive actions such as website blocking for non-compliance. The online gaming industry has experienced rapid growth in recent years, reaching an estimated Rs 16,428 crore in FY23-24.

India Seeks FATF Oversight for Online Gaming to Combat Money Laundering

India is advocating for the inclusion of online gaming platforms within the Financial Action Task Force (FATF) Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) framework. The government aims to enforce stricter KYC protocols and ensure mandatory reporting of suspicious transactions, including the identification of beneficial owners. This move follows concerns about illegal betting and money laundering activities facilitated by platforms like Mahadev Apps. India plans to raise this issue at the upcoming FATF meeting in Paris, focusing on the need for global standards in regulating online gaming.