The Indian smartphone surge has undoubtedly given the gaming sector a huge boost and its popularity is expected to increase thrice in coming years. Although the Indian gaming business is considered small- only 1% of the global gaming market – the mobile gaming trend could potentially increase its earnings.
The market for mobile gaming currently generates about $1.5 billion in revenue, but as per reports by 2025, it will reach $5 billion. In light of this, Nirmala Sitharaman on February 1 unveiled the budget for FY 2023-24. However, it didn’t specifically address the issues related to the AVGC sector, particularly the gaming and eSports segments.
The Narendra Modi government’s final full budget just before the 2024 general elections attempted to cater to as diverse segments of the population as possible. Nevertheless, some decisions are certain to impact the burgeoning industry. Let us look into the Budget 2023 decisions that will affect the Mobile Gaming Sector.
Revised TDS Rules
Through new provisions in the Income Tax Act of the Finance Bill on February 1, the Union government has finally established a clear contrast between online skill-based games and other games (luck based) like lotteries, puzzles, and crosswords. This has given the nascent industry much-needed clarity regarding taxation over prize money on online gaming platforms.
New Sections included
The finance bill adds two new sections: section 115BBJ on calculating taxes on earnings from online games & section 194BA on TDS (tax deducted at source) on gross winnings from online games.
In a news conference on February 1, Revenue Secretary Sanjay Malhotra says that since consumers normally play several games over time, as opposed to horse racing, where people typically play one game, taxation will now be applied to net wins from online gaming at a rate of 30% instead of individual matches.
With effect from July 1, 2023, the Bill eliminates the TDS minimum threshold of Rs 10,000 and permits it to be determined either after the fiscal year or at the date of user withdrawal.
How is it different?
Before this, gaming operators had to withhold TDS at a rate of 0.1 % for each wins of more than Rs 10,000, and gross profits from online gambling were subject to a flat 30 percent tax.
The deduction of TDS from net wins at the end of a fiscal year would accelerate the expansion of this emerging industry, demonstrating the government’s commitment to meeting the demands of both players and the sector.
GST Rates yet to be finalised
The government is also putting the finishing touches on the GST rate for the online gaming sector. Conrad Sangma, the chief minister of Meghalaya, chaired the interministerial body that recommended the GST Council to impose a 28% GST on gross sales value.
Currently, online gaming platforms charge an 18% tax on commissions for games that do not involve betting or gambling, but there is no tax on contest entry fees.
Boost to Mobile Production
According to the Budget, the number of mobile phones produced in India surged from 5.8 crore units priced at roughly Rs 18,900 crore in 2014–15 to 31 crore units worth more than Rs 2,75,000 crore in FY23. Sitharaman declared that she proposes to grant relief in customs duty on importing specific parts and inputs, including camera lenses, and continue the tax concessions on lithium-ion batteries for an additional year to develop further domestic value addition in the manufacturing of mobile phones.
As per industry experts, the growth of the fantasy & E-sports gaming industries in India is result of increase in manufacturing of mobile phones and will continue the same way. As per reports, the number of gamers will increase from 433 million to over 650 million in India by FY25.
The planned reduction in device production costs will further lower the purchasing price, bringing smartphones closer to the general public. Gaming on mobile phones became popular because of the smartphones. Particularly casual games are more popular and these are frequently the entry points for new players.
Boost to Mobile Gaming as a Career
According to experts, the Indian gaming market can significantly enhance the electronics industry, including the consoles, PC, VR, and mobile sector. In addition, the commitment of developers to promoting mobile gaming in India and the emergence of various career prospects through mobile gaming have boosted the number of Indians who perform mobile gaming and opt for it as a career.
As professional gamers advance in their careers, they usually look to upgrade their gadgets, which has helped the mobile device market flourish. Even casual players strive to play on better hardware. The commitment of the manufacturers of mobile devices to enhancing their visibility in the gaming community through committed efforts & investments is another example of how the sectors are interdependent.
Boost to Development and 5G
The government will establish 100 labs in the best engineering colleges to create applications & services for the next-gen 5G network, according to finance minister Nirmala Sitharaman’s announcement in her speech on the Union Budget for 2023–2024. Reliance Jio & Bharti Airtel have been rolling out 5G services across the country since India launched the technology in October of last year.
By 2025, the telecom industry will need 22 million competent professionals, & doing so will enable the country to become self-sufficient. The 100 5G labs & 3 CoE for AI will also promote the expansion of the 5G ecosystem & stimulate innovation. Better bandwidth and more data will be available as 5G usage increases in the Indian market. The Indian Mobile Gaming Sector will ultimately benefit from this.
How has the industry Reacted?
Various Experts in the field of technology and mobile have welcomed the changes. Many believe this budget will benefit the Mobile Gaming Industry in the country. All developers and mobile manufacturers have benefitted as the government realises the gaming industry’s importance to the economy. From creating employment to generating revenue, the mobile gaming industry is undoubtedly one of the most critical emerging sectors. Higher Officials of many gaming giants have expressed their satisfaction with the budget and wish to work hand-in-hand with the government to help develop this sector.
Conclusion
This budget addresses the gaming sector, especially the mobile gaming sector, as the changes & rules will definitely boost it greatly. The new income tax structure will increase local demand & consumption, which will boost the economy. In addition, the shift in India’s mobile phone trade from importer to exporter bodes well for the future of mobile gaming. We hope this year will be very beneficial for the mobile gaming industry in India.
