(GS2: Government policies and interventions)
The Ministry of Electronics and Information Technology (MeitY) has released draft amendments in relation to online gaming.
Major Highlights of the proposal
- Defines an ‘online game’: A game that is offered on the internet and is accessible by a user through a computer resource if s/he makes a deposit with the expectation of earning winnings.
- Companies offering such online games will be handled similarly to social media companies in terms of regulatory compliances and obligations.
- A self-regulatory body: Online games would be required to register with a self-regulatory body, and only games approved by the authority will be permitted to function lawfully in India. MeitY can recognise and derecognise all self-regulated bodies.
- Mandatory KYC norms: Online gaming companies would be compelled to follow the same rules as entities regulated by the RBI.
- Banning bets on the outcome: Online gaming companies will not be permitted to accept bets on game outcomes.
- Chief Compliance Officer: The platforms are expected to appoint a senior employee, who would coordinate with law enforcement agencies to ensure compliance with their orders.
- Nodal Contact Person: To facilitate the necessary coordination at any point of the day. Grievance redressal: The platforms must have in place an appropriate mechanism for the receipt and resolution of grievances.
- It will bring online gaming under comprehensive central regulation.
- These rules will help curb the menace of anti-national and illegal offshore gambling platforms.
- A uniform framework such as this will immensely increase investor confidence.
- The rules, built on principles of fairness, transparency, and independence, will help protect players and promote safety in gaming.
- This will help create a more responsive and agile framework to prevent harm and address user grievances
Online gaming sector in India
- The revenue of the Indian mobile gaming industry is expected to reach $5 billion in 2025. The industry grew at a compound annual growth rate (CAGR) of 38 percent in India between 2017-2020, as opposed to 8 percent in China and 10 percent in the US.
- The distinction between a game of chance and a game of skill has been maintained for over 150 years. The Public Gambling Act, of 1867expressly excluded games of skill from the purview of the expression “gambling”.
- Courts have repeatedly held that money involved in the playing of a game of skill would not amount to gambling.
- A serious controversy arose as to whether horse racing was a gambling activity. In a detailed judgment, the Supreme Court held that horse racing was a game of skill and could not be treated as gambling.
- Parliament has maintained the distinction between the two categories of games and has continued to hold that games of “mere skill wherever played” will not amount to gambling.
- Online gaming is a state subject
Concerns and Challenges
- The rules still bucket all gaming intermediaries into a broad category irrespective of size or risk. They all require similar compliances, including the need to have India-based officers.
This can disproportionately burden young start-ups, and make it difficult for global players to start their services in India.
- It is also possible that many online games in India will shut down and the business will go overseas. The net result will be lower tax revenue and large-scale unemployment.
- The moral dilemma seems to plague the Group of Ministers in deciding whether online games should be subject to tax at the highest rate of 28 percent on the entire collection or only on the platform fee charged by the gaming company.
- Online games are played through servers and electronic equipment that can be located anywhere in the world. It would then lead to unnecessary investigative activity on the part of the GST authorities.
- This is a first step toward comprehensive regulation for online gaming and will hopefully reduce the state-wise regulatory fragmentation that was a big challenge for the industry.
- There should be a widespread public consultation to ensure that economic rights, individual freedoms, and social imperatives remain in balance.