Online Gaming Bill Passed: Rajya Sabha clears the new bill, leading to a major disruption in the online gaming industry

NEW DELHI, India – In a move that sent shockwaves through the country’s burgeoning digital sector, the Rajya Sabha today passed the contentious Online Gaming Bill by a majority vote. The legislation, which imposes a new regulatory and tax framework on the industry, is being described by startups and investors as a "death blow" that could lead to a major disruption and a capital exodus from the sector. The bill will now be sent to the President for her assent to become a law.

The legislation has been at the center of a fierce debate for months, with the government arguing for stricter regulation to protect consumers, and the industry warning of an unviable business model. With the bill's passage, the online gaming sector, which has seen explosive growth in recent years, is bracing for an uncertain future.

Key Provisions and Tax Impact

The core of the controversy lies in the bill’s provisions concerning taxation. Following the GST Council's recommendation, the bill mandates a 28% GST on the total deposit made by a user, rather than on the platform's commission or Gross Gaming Revenue. This fundamental shift in the tax calculation, industry experts argue, makes the business model unsustainable.

In addition to the new tax regime, the bill establishes a new Online Gaming Regulatory Authority with broad powers to license, monitor, and regulate the sector. This body will have the authority to ban games deemed to be a threat to national security or those that promote addiction or gambling, based on their mechanics and not just whether they are "games of skill" or "games of chance."

Industry Reaction and Government's Stance

Industry leaders have expressed deep disappointment, stating that the new tax and regulatory burdens will stifle innovation and discourage foreign investment. "This is a regressive step that will kill the nascent startup ecosystem and push players towards illegal offshore platforms," said the head of a major gaming company. The industry fears that the high tax will make legal platforms uncompetitive, leading to a flight of talent and capital to other countries.

The government, however, has stood firm. A government spokesperson stated that the bill is a necessary step to address public health concerns, combat money laundering, and ensure a safer digital environment. The government has dismissed the industry's concerns as a short-term issue that will be resolved once the market adjusts to the new framework, arguing that the bill prioritizes citizen welfare over business interests.