A ministerial panel is likely to recommend a uniform 28 percent tax GST rate on Online Gaming, irrespective of whether it is a game of skill or chance.

Online gaming sector in India

• In the past few years, India’s nascent online gaming industry witnessed an unprecedented rise, catapulting it to the top five mobile gaming markets in the world.
• Registering a growth rate of 38%, online gaming is the next sunrise industry.
• Currently, there are more than 400 gaming companies in India, and it is home to 420 million online gamers, second only to China, according to an analysis by KPMG.

Types of gaming

• The types of online gaming include:

1. E-sports (well-organized electronic sports which include professional players) ex. Chess
2. Fantasy sports (choosing real-life sports players and winning points based on players’ performance) ex. MPL cricket
3. Skill-based (mental skill) ex. Archery
4. Gamble (based on random activity) ex. Playing Cards, Rummy

Why is the gaming industry booming in India?

1. Digital India boom in the gaming industry
2. Narrowing of the digital divide
3. IT boom

Other factors promoting the boom

1. Growing younger population
2. Higher disposable income
3. Inexpensive internet data
4. Introduction of new gaming genres, and
5. Increasing number of smartphone and tablet users

Prospects of online gaming

• State List Subject:  The state legislators are, vide Entry No. 34 of List II (State List) of the Seventh Schedule, given exclusive power to make laws relating to betting and gambling.
• Distinction in laws: Most Indian states regulate gaming on the basis of a distinction in law between ‘games of skill’ and ‘games of chance’.
• Classification on dominant element: As such, a ‘dominant element’ test is utilized to determine whether chance or skill is the dominating element in determining the result of the game.
• Linked economic activity: Staking money or property on the outcome of a ‘game of chance’ is prohibited and subjects the guilty parties to criminal sanctions.
• ‘Game of Skill’ debate: Placing any stakes on the outcome of a ‘game of skill’ is not illegal per se and may be permissible. It is important to note that the Supreme Court recognized that no game is purely a ‘game of skill’ and almost all games have an element of chance.

Need for regulation

• No comprehensive regulation:  India currently has no comprehensive legislation with regards to the legality of online gaming or boundaries that specify applicable tax rates within the betting and gambling industry.
• Ambiguity of the sector: The gaming sector is nascent and is still evolving, and many states are bringing about legislation seeking to bring about some order in the online gaming sector.
• State list subject: Online gaming in India is allowed in most parts of the country. However, different states have their own legislation with regards to whether online gaming is permitted.
• Economic advantage: Well-regulated online gaming has its own advantages, such as economic growth and employment benefits.

Issues with online gaming

• Gaming addiction: Numerous people are developing an addiction to online gaming. This is destroying lives and devastating families.
• Compulsive gaming: Gaming by children is affecting their performance in schools and impacting their social lives & relationships with family members. Ex. PUBG
• Impact on psychological health: Online games like PUBG and the Blue Whale Challenge were banned after incidents of violence and suicide.
• Threat to Data privacy: Inadvertent sharing of personal information can lead to cases of cheating, privacy violations, abuse, and bullying.
• Betting and gambling: Online games based on the traditional ludo, arguably the most popular online game in India, have run into controversy, and allegations of betting and gambling.

Why hasn’t a comprehensive law yet materialized?

• Earlier, states like Tamil Nadu, Telangana, Andhra Pradesh, and Karnataka also passed laws banning online games.
• However, they were quashed by state High Courts on grounds that an outright ban was unfair to games of skill:

1. Violation of fundamental rights of trade and commerce, liberty and privacy, speech and expression;
2. Law being manifestly arbitrary and irrational insofar as it did not distinguish between two different categories of games, i.e. games of skill and chance;
3. Lack of legislative Competence of State legislatures to enact laws on online skill-based games.

Way forward

• Censoring: Minors should be allowed to proceed only with the consent of their parents — OTP verification on Aadhaar could resolve this.
• Awareness: Gaming companies should proactively educate users about potential risks and how to identify likely situations of cheating and abuse.
• Regulating mechanism: A Gaming Authority in the central government should be created.
• Accountability of the gaming company: It could be made responsible for the online gaming industry, monitoring its operations, preventing societal issues, suitably classifying games of skill or chance, overseeing consumer protection, and combatting illegality and crime.
• All-encompassing legislation: the Centre should formulate an overarching regulatory framework for online games of skill. India must move beyond skill-versus-chance debates to keep up with the global gaming industry.

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