Youngsters & Online Gaming GST: Lessons In Policymaking

India's digital revolution has given rise to a thriving entrepreneurial ecosystem, fuelled by the Gig Economy and the dominant presence of Millennials and Gen Z (GEMZ). The GEMZ population represents a significant proportion of India's demographics and is often hailed as the nation's soft power. This youth cohort, who make up the largest productive workforce, possesses distinct social behaviour and thinking patterns. We can observe this through their digital proficiency and the emergence of new businesses and models catering to their evolving consumption patterns, and application of emerging technologies. Given their influence across society, social media, electoral politics, and policy, one would expect them to have a significant impact. Does the public policy fail them, by not understanding them?

The recent announcement of the highest GST rate on online gaming stands tall. Firstly, the Government allowed investors to invest into online gaming platforms over the years, allowed them to proliferate, create jobs & bring capital. Then came the political-moral-coated assertion equating gaming to gambling. Such policy risk will always spook investors, importantly the foreign investors, and are in poor demonstration of Digital India intent.  The post-announcement ‘clarification’ narrative that the GST rate was always at 28 per cent is in poorer taste. Just in case, if it were so, it shows the huge communication gap in taxation.

Consistency and predictability in policy-making are crucial for attracting both domestic and foreign investments in the digital entrepreneurship space. The traditional approaches to policy development are inadequate in a rapidly evolving landscape where emerging technologies and societal adoption demand forward-thinking policies.

A few weeks ago, we witnessed a similar back-and-forth situation regarding TCS on foreign remittances. The policy was initially announced with urgency, but despite public outcry, it was swiftly reaffirmed as an excellent measure. It was then postponed for a few months, ascribely due to political influence. These actions seem to be revenue-focused attempts at extracting more from those who are already paying taxes.

Policymakers should prioritise initiatives that bring a wider range of non-payers into the tax system, ensuring a fair and equitable distribution of fiscal responsibility. There are wealthy farmers who are not taxed at all,  the guise of toiling with the land. What about the other hardworking individuals who contribute to nation-building but don't even have well-maintained civic infra in the cities they reside in? A similar situation arises in the taxation of the gaming sector. Which state would have the gumption to be a political-morality contrarian to differ in the GST council discussions and vote that gaming sector be understood ? That could have been used much against them by the other parties in the upcoming electoral debates.  It only shows the par for the course, for old-school beliefs in what youngsters should do, and supposed attempts in teaching them how to.

While respecting societal values and moral thresholds is essential, it is equally important to recognise that India's cultural landscape is evolving alongside technological advancements. Online gaming, in particular, has become an integral part of New-India, providing a platform for entertainment, competition, and community building. Gaming goes beyond entertainment, serving as a powerful tool for youth engagement, skill development, and societal progress. Gamification incorporates game design principles in non-game contexts, making gaming valuable for learning, problem-solving, and skill acquisition. Through gamification, gaming enhances learning, and helps in financial literacy, e-governance, and health services, amongst many others. Issues around parts of the gaming sector like addiction and financial issues have solutions. It is imperative to acknowledge that online gaming, when regulated responsibly, offers avenues for edutainment, and even professional careers. 

By neglecting the role gaming plays in the lives of the youth, policymakers risk alienating an essential demographic and stifling their potential contributions to the digital economy. It is crucial for policymakers to look beyond short-term political gains and consider the long-term implications of their decisions on the digital landscape and the aspirations of the GEMZ demographics. 

Undoubtedly, public policy-making should consider both moral principles and social behaviour. However, determining what constitutes morality is a complex task. Policies must strive to strike a balance that promotes the long-term well-being and sustainability of society. Policymakers should make an effort to comprehend the prevailing social and moral norms, many of which have been shaped by the influence and adoption of emerging technologies. 

India is renowned for its diverse beliefs and cultural practices. For instance, playing cards (with real money to bet) during Diwali is widely accepted in certain regions, while other geographic areas and communities consider it sinful. Will there be a law regulating it ? Incorporating these moral judgments into policy-making poses a challenge. Similarly, drawing political or ideological comparisons based on past Indian societal behaviour holds little relevance when shaping public policies for the future.

In the span of just 35 years, India has witnessed significant changes. What was once considered a luxury, such as a landline phone or a two-wheeler has now transformed into widespread accessibility. Almost every Indian now has a mobile phone. Should our policies continue to protect outdated policy thinking and irrelevant-to-consumer institutions like BSNL under the guise of ensuring sufficient market competition? Shouldn’t  it prioritise fostering an environment of Ease of Business for emerging sectors, providing our youth with promising opportunities for the future?

While politically, one might feel comfortable with few thousand entrepreneurs migrating out of India every year (or Indian startups domiciling abroad), one cannot underestimate the negative sentiment it creates as a domino-effect on newer entrepreneurs, and importantly the investing community (both domestic and foreign). If India wants to nurture digital entrepreneurs, it needs humility in understanding how the younger generation lives its daily life, and what makes them function. 

Striking a balance between preserving societal core values and embracing contemporary trends is essential for creating a policy framework that resonates with the needs and aspirations of the GEMZ demographics. The need for policy evolution goes beyond taxation and beyond online gaming. There lies the trust chasm.

(Disclaimer : the author has no connection or commercial interests in the online gaming sector )

Dr. Srinath Sridharan - Author, Policy Researcher & Corporate advisor

Twitter : @ssmumbai