Indian Game Companies Push For Industry Separation

For over a decade, real-money gaming and fantasy sports startups in India have operated under the broad label of video game companies. However, as regulatory scrutiny intensifies, a coalition of over 70 video game companies is calling on the Indian government to clearly distinguish between these industries.

In a letter addressed to Prime Minister Narendra Modi and the Ministry of Information and Broadcasting, the coalition urged the government to move away from the generic term “online games” and instead adopt distinct categories: “video games” and “real money games.” This request is part of a broader initiative to bolster the country’s digital entertainment sector.

The push for precise definitions follows recent tax amendments that placed real money games in a higher 28% tax bracket, while video games remained at 18%. The absence of a clear distinction has led to unintended consequences for video game companies. The coalition’s letter highlighted that many video game firms have faced multiple tax audits and show cause notices. Additionally, banks and payment gateway companies have been hesitant to provide services due to the confusion.

Signatories of the letter include prominent companies like Gmonks, Newgen, Lila Games, Dot9 Games, and the Esports Federation of India. They pointed out instances where local police have mistaken video game parlors for gambling establishments, causing unnecessary raids. This confusion has also complicated interactions with international investors, who need constant reassurance that new regulations do not target video games.

The need for industry differentiation is further emphasized by the growing influence of fantasy sports startups, which increasingly overshadow the traditional video gaming sector. Lawmakers have largely overlooked the concerns and policy proposals of legitimate video game companies, highlighting the necessity of distinguishing between the two industries.

To address these issues, the coalition proposes clear definitions within Indian policy frameworks. They define video games as digital entertainment products played for leisure or learning, without any monetary staking. Conversely, real money games involve users staking money with the potential to win or lose real currency.

The group also urges the Ministry of Information and Broadcasting to prevent media outlets from using images of video games in reports on real money games or gambling, aiming to correct public misconceptions. The letter stresses the importance of public perception for the growth and acceptance of the entertainment medium.

In a broader regulatory context, the video game industry is advocating for the Information & Broadcasting Ministry to become their primary regulatory body, aligning them with other entertainment and media sectors. This is in contrast to the real money gaming sector, which falls under a different regulatory jurisdiction.

Despite India’s status as a leading startup ecosystem and an emerging global manufacturing hub for tech giants, its video game industry remains underdeveloped. This gap highlights the urgent need to address the challenges facing the sector.

The coalition’s key proposals include establishing a Catalyst Fund to provide financial support to startups and micro, small, and medium enterprises, encouraging banks to recognize digital IP as collateral for business loans, improving higher education in game development, reducing GST on video games from 18% to 12%, and advocating for corporate tax holidays to attract investments and support industry sustainability. These measures aim to foster growth, attract investments, and ensure the long-term viability of the Indian video game industry.

As India continues to evolve as a technological and entrepreneurial powerhouse, it’s crucial that the video game industry receives the recognition and support it deserves. Clear regulatory distinctions and supportive policies will not only help differentiate video games from real money games but also pave the way for significant growth in the digital entertainment sector.