India intends to review the national sales tax regime for companies that operate in the sphere of online gaming after March of the current year.

The virtual gaming industry, which currently has a financial volume of $20 billion, faced a tough tax regime in India last year. In 2023, a group of Indian state finance ministers led by Federal Finance Minister Nirmala Sitharaman decided to impose a 28% tax on goods and services from the sphere of online games, which was booming during the coronavirus pandemic. The Goods and Services Tax Council agreed to review this rule after a six-month period.

Revenue Secretary Sanjay Malhotra, during a conversation with media representatives at the end of last week, said that the entire tax structure for companies that operate in the online gaming industry will be reviewed after March. According to him, since the entry into force of the mentioned tax on October 1 last year to January 2024, income from firms operating in the specified sphere of activity amounted to 34.7 billion rupees ($418 million). The Government of India expects this figure to be fixed at around 140 billion rupees in 2024-25.

Companies operating in the online gaming industry, including Delta Corp. and Dream11, backed by Tiger Global, faced tougher requirements from regulators amid the adoption of measures by the leadership of the South Asian country aimed at combating tax evasion. The tax authorities have issued 71 notices to firms operating in the mentioned area for alleged disregard of the specified financial obligation totaling more than 1.12 trillion rupees during fiscal years 2023 and 2024. The relevant data was reported to the Parliament by the Ministry of Finance of India last December.

Sanjay Malhotra stated that approximately 53 foreign companies operating in the online gaming industry have been blocked from access for ignoring the norms of the South Asian country’s tax policy. During a conversation with media representatives, the revenue secretary, in the context of answering a question about the taxation regime for capital gains on the sale of listed and unlisted securities, noted that the government would consider all demands, including simplification of the tax structure, at the presentation of the draft budget in July. There is currently no information on the potential range of the tax revision determining the financial obligations of companies operating in the online gaming industry in India.

It is worth noting that the South Asian country is an important market for developers of the mentioned digital products. In this case, an important factor is the significant size of the consumer audience in India.

Also, Sanjay Malhotra, speaking to reporters, said that currently, the Indian government is not considering reducing excise taxes on gasoline and diesel fuel, since the corresponding figure is the lowest in the last four years. Separately, the revenue secretary noted that the tax on windfall income from domestic crude oil production and fuel exports will be in effect until the oil price exceeds $75 per barrel.

As we have reported earlier, India Cuts Tariffs to Entice iPhone Manufacturing.