The Indian government has made it mandatory for offshore online gaming companies operating in the country to register their operations locally or appoint a representative to pay taxes on funds collected from customers.

Last week, India decided to impose a 28% tax on the total money online gaming companies collect from players, instead of a 28% tax on each bet.

Overseas online gaming companies operating in India will be banned if they fail to register in India or appoint a representative or agent to pay taxes, according to amendments tabled by parliament on Friday.

“Offshore online gaming companies will not enjoy any tax arbitrage and will enjoy the same treatment as their domestic counterparts,” said Rajat Mohan, partner at AMRG & Associates.

The move to tax online gaming companies has shocked the nascent industry worth $1.5 billion (nearly Rs 1,243 crore), which is backed by global investors. More than 100 gaming companies and top investors such as Tiger Global and Peak XV have written to the government asking it to reconsider the decision.

“The decision was made after about three years of careful deliberation,” one source said.

On Wednesday, Indian gaming app Mobile Premier League said it would lay off 350 workers as it took steps to “survive” government-imposed taxes.

The sources said that India’s finance and state ministers considered online money games “on the negative impact on society, especially young people, Internet gaming disorder due to addiction to online games”.

The source said the move “is not a ban, just a tax on online money games, which is nothing more than gambling in any name and should be taxed at the highest rate”.

The tax does not apply to online games that do not involve money.

© Thomson Reuters 2023


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