Senator Sushil Kumar Modi spoke on the issue of online gaming for money, urging the Centre to offer a regulatory framework for the industry. With States’ efforts to control paid gaming largely failing, he fears authorities are missing out on (offshore) income. Crucially, lawmakers need to find a way to protect Indian youth.
Dealing with Online Gaming on a Nationwide Level
In an emblematic intervention during Zero Hour, Sushil Kumar Modi, a Rajya Sabha MP, raised some questions on the need to regulate and tax online gaming. He pointed to the inability of State governments to pass sensible legislation, above all, as the reason for the Centre to intervene and set nationwide standards.
Online gaming is a widespread phenomenon among over 430 million Indians, facilitated by mobile phones and internet coverage. The number of gamers is expected to rise to over 650 million by 2025, the MP noted. What’s more, while the average desi consumer used to spend roughly 2.5 hours playing mobile games every week, post-Covid this has increased to over 4 hours.
The booming online gaming industry may pose a problem for other reasons as well. Kids and young adults have practically unlimited access to online games for money, and many fail to spot the difference between games of skill and chance. Sushil Modi made a comparison with the crypto industry which also has noticeable gaps in Central regulation and legislation to date.
While people may enjoy their favorite online roulette for real money, play Ludo, Rummy, Poker or Fantasy sports or even purchase an online lottery ticket, Modi insisted that both companies and players need to pay a uniform tax for those activities and, ultimately, the Government needs to provide a “comprehensive framework” of regulation for the business.
High court lawyers agree that issuing a blanket ban is easy. However, compliance is the difficult part, as most top-level gaming companies are based offshore. This is exactly what legislators in Telangana, Andhra Pradesh and Kerala did, banning all online gaming, yet it was struck down by regional High Courts as unconstitutional and disproportionate.
A careful legal review would allow more control over responsible gaming policies, collect more government tax revenues and monitor offshore operations. The Ministry of Communications, Electronics and IT was asked to take a note and act accordingly by the Rajya Sabha Chairman.
Missing Out on Economic Potential
Industry experts have long sounded the alarm about the huge amounts of gaming revenue and business potential that gets lost into grey markets and offshore operations. Regulation can bring transparency to the market, raising public income and stimulating further investments into desi gaming startups.
Annual tax forms, in fact, require winnings from online gambling and gaming investments to be declared. The anti-money-laundering act, however (PMLA of 2002), declares foreign entities to be non-reporting and therefore tax-exempt. The amount of income sent abroad is comparable to the total online gaming market, estimated to reach Rs 29,000 crore in 2025. Considering a flat 30 percent tax rate, plus cess, this makes up to Rs 10,000 crore (over $1.3 billion) in annual tax revenue lost.
Naturally, these figures do not take into account all the other related and supporting industries – such as animation, testing and other development studios and tech startups. Nor do they count in personal and professional gamer income, also taxed at the same rate. While playing skill games for money is a legitimate occupation, paying one’s taxes adds the true moral dimension of responsible gaming.
In that sense, Sushil Modi’s point about the completely unregulated online gaming market needs careful consideration and much work by legislators.
