A pertinent issue relating to the implementation mechanism proposed in the Union Budget for TDS (Tax Deducted at Source) on online games has been highlighted in the report.
A report states that regulation of online gaming will not only open up economic opportunities but also address various social issues.
A report states that the online gaming sector is a fast-growing industry, which has the potential to significantly contribute to the country’s goal of becoming a $1 trillion digital economy, generate substantial employment and spur innovation.
A report titled ‘Online gaming in India: The taxation quandary’ by Primus Partners states that regulation of online gaming will not only open up economic opportunities but also address various social issues.
The announcements in the Union Budget 2023-24 are positive for the sector as it has addressed the persistent demand for income tax to include set-off of losses in computing profits from online games.
A pertinent issue relating to the implementation mechanism proposed in the Union Budget for TDS (Tax Deducted at Source) on online games has been highlighted in the report.
“The issue has arisen due to amendment in section 194B, under which online gaming is currently covered with effect from 1st April, 2023 and separate provision on online gaming i.e. section 194BA is coming into effect from 1st July, 2023, thereby creating a The discrepancy is happening,” it said.
It would be ideal to streamline the applicability of the amendments to “online games” and establish a sole effective date of April 1, 2023. Alternatively, the present tax regime may be continued for the period between April 1, 2023 and April 1, 2023. June 30, 2023, to eliminate any discrepancies in interpretation.
The report noted that repeated growth would also result in higher costs for the industry, resulting in unnecessary expenses that would be difficult for many small and medium-sized gaming companies to bear.
On the GST front, the report said evidence from countries where the sector has evolved to show the GGR (Gross Gaming Revenue) tax model has enabled the industry to flourish.
“Leaving GST on net face value would be a departure from established practices, apart from making the sector unviable. The recent changes in TDS on income from prize pool in online gaming without any limit should be considered by the GST Council,” it said.
It added that online gaming is a fast-growing industry that is expected to grow at a CAGR of around 27 per cent over the next five years in India. It added that the sector has huge potential to boost India’s GDP and is expected to be a significant one. Job generator, with the potential to add over 1 million jobs by 2030.
“A strong and enabling regulatory framework for a dynamic sector like online gaming will ensure a responsible, transparent and safe environment for all,” said Nilay Verma, CEO, Primus Partners India.
He said that the online gaming sector has tremendous potential, if it is encouraged with the right regulatory support from the government and a growth-friendly tax regime.
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