Lok Sabha Question No. 196 (STARRED), answered on 2023-08-02
Subject: Online Gaming Industry
Ministry: ELECTRONICS AND INFORMATION TECHNOLOGY
Asked by: Amar Singh, Saptagiri Sankar Ulaka

## GOVERNMENT OF INDIA MINISTRY OF ELECTRONICS AND INFORMATION TECHNOLOGY

## LOK SABHA

## STARRED QUESTION NO. *196

TO BE ANSWERED ON: 02.08.2023

## ONLINE GAMING INDUSTRY

## *196. DR. AMAR SINGH: SHRI SAPTAGIRI SANKAR ULAKA:

Will the Minister of ELECTRONICS AND INFORMATION TECHNOLOGY be pleased to state:-

- (a) whether the Government has a plan to generate revenue from online gaming industry in the country and if so, the details thereof along with the different revenue streams envisaged for the same;
- (b) whether the Government has studied the possibility of decline in revenue from high taxes on online gaming and if so, the details thereof and if not, the reasons therefor;
- (c) the steps taken by the Government to overcome jurisdictional limitations between State and Central laws regulating online gaming in the country;
- (d) the details of total revenue generated through the online gaming industry through investments, direct industry revenues, in-app purchases and other revenues since 2019; and
- (e) whether the Government has formulated a uniform code of conduct for the Self Regulatory Bodies under the proposed IT Rules 2023 and if so, the details thereof?

## ANSWER

MINISTER FOR ELECTRONICS AND INFORMATION TECHNOLOGY (SHRI ASHWINI VAISHNAW)

- (a) to (e):     A Statement is laid on the Table of the House.

## STATEMENT REFERRED TO IN THE REPLY TO LOK SABHA STARRED QUESTION NO. *196 FOR 02.08.2023 REGARDING ONLINE GAMING INDUSTRY

……..

(a) to (e): Online gaming is a part of the overall innovation and digital economy ecosystem in  India.  Several  start-ups  continue  to  innovate,  grow  and  invest  to  create  jobs  in  this sector.  As  per  the  Government  of  India  (Allocation  of  Business)  (Three  Hundred  and Seventieth  Amendment)  Rules,  2022  dated  23rd  December  2022,  'Matters  relating  to online  gaming'  has  been  allocated  to  the  Ministry  of  Electronics  and  Information Technology, Government of India and over a period  of few months, after extensive public consultation, the Central Government has put a framework and  guardrails to prescribe and regulate permissible online games and on 6.4.2023, the Central Government, in exercise of its  powers under the Information Technology Act, 2000, has notified amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021  ('IT  Rules,  2021').Through  this  framework,  to  be  verified  and  declared as permissible  online  game  in  Indian  cyberspace,  such  online  game  shall  be  free  from wagering on outcome and does not cause user harm and addiction.

In so far as the revenue from online gaming is concerned, as per the information received from  Department  of  Revenue,  Ministry  of  Finance, vide Finance  Act  2023,  a  separate section 115BBJ (regarding Tax on winnings from online games) has been inserted in the Income-tax  Act,  1961  (the  Act)  to  provide  that  where  the  total  income  of  an  assessee includes any income by way of winnings from any online game, the income-tax payable shall be the aggregate of:-

- i) the amount of income-tax calculated on net winnings from such online games during the previous year, computed in the prescribed manner, at the rate of thirty per cent; and
2. ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the net winnings referred to above.

Section 115BBJ of the Act applies from 01.04.2023 and is accordingly applicable for the assessment year 2024-25 and subsequent assessment years.

Vide Finance  Act  2023,  a  separate  section  194BA  (regarding  Winnings  from  online games) was also inserted in the Act with effect from 01.04.2023 to provide for deduction of tax at source on "net winnings" from online games at the rate of thirty per cent.

The Central Government has also prescribed Rule 133 in the Income-tax Rules, 1962 vide Notification G.S.R. 379(E) No. 28/2023 dated 22.05.2023, which lays down the formula for  calculating  -'net  winnings".  Further,  the  Central  Board  of  Direct  Taxes  has  issued Circular No. 5 of 2023 dated 22.05.2023 which provides clarity on various issues relating to  deduction  of  tax  at  source  on  "net  winnings".  The  aforementioned  Rule  and  Circular ensure that there is certainty in levy of income tax for the online gaming sector which will promote ease of doing business and help the industry in its growth.

The winnings from online games are chargeable to income tax at the rate of thirty per cent which is the same rate of income-tax as on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever. Further, for online games, the tax is on "net winnings" in  the  user  account  which is  calculated after aggregating all winnings  (including losses) during the year.

The Department of Revenue, Ministry of Finance, has further informed that GST rates and exemptions are prescribed on the recommendations  of GST  Council  which  is a constitutional body comprising members from Union Government and State/UT Governments.  The  GST  Council  had  set  up  a  Group  of  Ministers  on  Casinos,  Race Courses and Online Gaming, whose reports were placed before the GST Council. After details  deliberations,  the  GST  Council  in  the  50th  Meeting  held  on  11 th July,  2023  has clarified that actionable claims supplied in online gaming are levied to a GST rate of 28%. In  regards  to  the  details  of  total  revenue  generated  through  the  online  gaming  industry through investments, direct industry revenues, in-app purchases and other revenues since 2019, it is informed that Section 115BBJ relating to tax on winnings from online games has been inserted in the Act with effect from 01.04.2023 and accordingly applies for the assessment year 2024-25 and subsequent assessment years. For the assessment years prior to the assessment year 2024-25, the winnings from online games were chargeable to tax under  section  115BB  of  the  Act  along  with  lotteries,  crossword  puzzles  etc.  Hence separate data for income tax from the online gaming industry is not available.

Further,  section  194BA  relating  to  deduction  of  tax  at  source  on  "net  winnings"  from online games has been inserted in the Act with effect from 01.04.2023. For the time period prior to 01.04.2023, the deduction of tax at source on winnings from online games was made under section 194B of the Act which also applies to lotteries, crossword puzzles etc. Hence separate data for deduction of tax at source for online gaming is not available.

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