Online Gaming

Context: Recently, the Goods and Services Tax (GST) Council decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing. About Online Gaming:
  • Online gaming refers to games that can only be played with an internet connection.
  • This is a part of the sunrise industry with a growing demand for game access.
  • Types of Online Gaming:
    • E-sports: Well organised electronic sports which include professional players).
    • Fantasy sports: Choosing real life sports players and winning points based on players’ performance.
    • Skill Based: Mental skill.
    • Chance Based: Based on random activity like roll of a dice) online games.
Games of skill Games of chance or luck
  • Principle Approach: To win or increase the odds of winning the individual needs to have the prerequisite experience and extensive knowledge of the game.
  • There is an identifiable learning curve in developing the necessary skills and honing them to adapt to different scenarios.
  • Example: Chess, Carrom, Rummy, Teen Patti, Horse Racing and Fantasy Sports are said to be games of Skill
  • These games are based on pure luck where the odds of winning cannot be boosted by a player’s skill, experience and/or knowledge.
  • They are based on unpredictable outcomes, thus, there is no skill involved.
  • Examples include Baccarat, slot games, lotteries, and table games such as blackjack, teen patti and roulette.
India’s Online Gaming Potential
  • The Indian gaming market is expected to grow from $2.8 billion in 2022 to $5 billion in 2025, growing at a CAGR of 28-30%.
  • The quantity of gamers in the nation is supposed to expand from 420 million in 2022 to 450 million by 2023, and it hit 500 million by 2025.
  • E-sports has been a growing and emerging sub-segment in the country with close to 10-15 mn E-sports viewers in India in FY20 and projected to grow to 130+ mn viewers by FY257.
Reason for Growth of Online Gaming In India
  • Penetration of Smart Phone: According to the World Economic Forum (WEF), mobile devices are the primary driver of India’s gaming industry. India Currently has some 650 million smartphone users
  • Affordability and Availability of Internet: India is a data-rich market with cheaper mobile data as compared to global averages. India being a mobile first gaming market, is expected to benefit immensely from this growing internet penetration.
  • Young Population: Gaming has a higher adoption amongst the younger population in India with the 18-30 age group highly engaged users of gaming
  • Adoption of digital payment methods: Increase in penetration of digital payments instruments driven by demonetisation and the COVID-19 induced lockdown has reduced the friction for digital purchases in-game and has contributed to the rapid growth in online payments on gaming portals
  • COVID-19 pandemic impact: Due to the restrictions and lockdown imposed by Covid 19, there were online schools and work-from-home and the growing popularity of digital payment contributed to increasing demand for online gaming.
  • Recognition for esports as a standalone sub-segment: It has also been officially recognised by the Indian Olympic Association by establishing the Esports Federation of India as the leading governing body of Esports in the country.
  • Increasing games with localised content: Most of the popular games in India like Teen Patti by Octro, Ludo King by Gametion and others provide options to play games in local languages like Hindi, Gujarati, Marathi etc., thus attempting to target a large local audience
  • Growth in investments: Various global investment firms have made significant investments in the Indian game sector over the past 2-3 years, helping gaming companies achieve operating scale.
Benefits of Online Gaming:
  • Convenience: Compared to traditional gaming methods, online gaming may be accessed from the comfort of one’s home or from any location with an internet connection.
  • Inclusive: Online gaming makes participating in gaming activities that might otherwise be challenging or impossible for those with disabilities or those who have trouble leaving their homes more accessible.
  • Revenue Generation: Through taxation and regulation, online gaming has the potential to bring in a sizable sum of money for the Indian government.
    • According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.
  • Employment: It may open up employment prospects for Indian business owners, who may then construct and manage their own online gaming platforms.
 Concerns Associated with Online Gaming:
  • 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.
  • Unintentional or unauthorised purchases within a game that could result in very large bills – adjusting the device settings and game purchasing settings such as removing credit card information can help to mitigate against this risk.
  • Exposure to inappropriate content: Exposure to problematic content such as violence, sexual content, gender or racial stereotypes, and exposure to inappropriate behavior from other players.
  • Cyberbullying and harassment through online gaming chat functions or message boards that can often be anonymous and targeted.
  • Behavioral Changes: Excessive playing encouraged by the way online, multi-player games are designed. Online games can become habit-forming as they are built specifically to entice users to return often.
  • Viruses and Malware / Ransomware: Hackers may try to get kids to download infected files or encourage children/youth to visit infected websites on gaming forums.
  • Privacy: Personal information may be shared with third parties. Some gaming platforms may encourage users to link their gaming accounts with other social network platforms.
  • Offshore gambling websites: Most of the betting in India is done on cricket matches, through websites like Betaway, Bet365 and DafaBet. These websites are headquartered in tax havens like Malta, Cyprus and Gibraltar but are accessible to Indian users.
 Regulation of Online Gaming in India:
  • Seventh Schedule: Constitution of India empowers State governments to legislate on matters relating to betting and gambling vide Entry 34 and Sports vide Entry 33 of the State List of the Seventh Schedule.
    • However, the State cannot legislate on games of skill as it is only concerned with betting, gambling and sports, which fall under the ambit of games of chance.
  • Courts on Online Gaming: According to various Court’s judgement, betting on games of skill is legal, while betting on games of chance is not.
    • Playing online games and sports of skills forms part of article 19 (1) (g) and Article 21 of the constitution.
    • States only have the power to make laws and regulate gambling, and betting on the activity of gambling.
  • Legal Entity:  Any online gaming platform – domestic or foreign– offering real money online games to Indian users will need to be a legal entity incorporated under Indian law.
  • Reporting Entity: These platforms will also be treated as ‘reporting entities under the Prevention of Money Laundering Act, of 2002.
  • Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023: It is a comprehensive framework for Online Gaming Eco-system.
    • Definition of Online Games: The new rules define an ‘online game’ as “a game that is offered on the internet and is accessible by a user through a computer resource or an intermediary
    • Self-Regulatory Body (SRB): It requires real money gaming platforms to register with a self-regulatory body (SRB) that will determine whether or not the game is “permissible”.
    • Games Banned: The new rules for online gaming prohibit any game that involves betting and wagering.
    • Role of intermediaries: Obligatory for intermediaries to not host, publish or share any online game that can cause harm or hasn’t been verified as permissible. No advertisement or promotion of non-permissible games allowed on their platform.
Government Initiatives to Promote Safe Online Gaming in India:
  • Digital Gaming Research Initiative: The government has started a digital gaming research initiative to support the Indian digital gaming research space and industry. 
    • The Science and Engineering Research Board (SERB) of the Department of Science and Technology has identified three main directions for its Digital Gaming Research Initiative:
      1. R&D in learning and leisure gaming platforms,
      2. immersive game prototypes with an emphasis on Indian culture and values.
      3. Collaborative technical design process, which was made by SERB Game Labs.
  • AVGC Promotion Task Force: The Ministry of Information and Broadcasting has established the Animation, Visual Effects, Gaming and Comic (AVGC) Promotion Task Force.
    • The government recognizes that the Indian AVGC industry has the ability to carry the “Make in India” and “Brand India” banners. 
 Online Gaming Regulation Globally:
  • China: It has placed strict limits on the time young people may spend playing online games. Online gaming in the country is now only available to people younger than 18 from 8 p.m. to 9 p.m. on Fridays, Saturdays, Sundays and public holidays.
  • USA: In the U.S., Internet casino gaming remains illegal in every state that doesn’t explicitly legalise the games.
  • Germany’s Youth Protection laws: It aimed at violent games pushed developers to replace realistic red blood with a green version.
  • Australia: It has sought to ban games for including depictions of everything from assault to marijuana use.
Way Forward:
  • Uniformity in Laws: Proper gaming regulation for all parties involved is urgently needed, otherwise the centre should be given the authority to enact rules and regulations using either the residuary powers under article 248 of the power under article 252.
  • Coordination and Cooperation: To fully realise the potential of the online gaming industry, the State and Union Governments should work together to set appropriate guidelines in conjunction with industry stakeholders.
  • Monitoring: To standardise regulations and maintain uniformity in the laws across India, there has to be one regulatory authority overseeing the whole online gambling sector.
  • Parent Responsibility: Parents need to be accountable for their children’s gaming habits and time spent online.
  • Safeguarding Children: Implement an age rating system that restricts minors to go on without their parents’ permission. This issue could be solved by using OTP verification on Aadhaar.
  • Awareness: Gaming businesses should aggressively inform players about possible risks and how to spot circumstances where cheating and abuse are likely to occur.
  • Transparency: Participants’ anonymity should be removed, and a strong grievance management mechanism should be developed.
  • The Indian gaming industry is now poised to become one of the fastest-growing sectors in the global gaming industry. With one of the largest youth populations in the world, India is expected to be one of the leading markets in the gaming industry.
  • Future growth in the Indian gaming industry will be brought about as a result of rapid digitalisation and change, rising internet usage, and increasing smartphone penetration.
  • There will be creation of new features, and players will be able to enjoy more lifelike, vibrant, and captivating experiences. Gaming experiences will continue advancing and eventually help the Indian gaming industry achieve remarkable heights.
Related Information:
  • India’s first centre of excellence in online gaming is set up in Shillong.
  • Aim: To promote the associated digital ecosystem in the northeast region.
About Goods and Services Tax (GST) Council:
  • By Article 279A of the Indian Constitution, the GST Council to be formed by the President to administer and govern GST.
  • Composition:
    • Chairman is Union Finance Minister of India with ministers nominated by the state governments as its members.
    • Voting Power: The council is devised in such a way that the centre will have 1/3rd voting power and the states have 2/3rd.
      • The decisions are taken by a majority of 3/4th members.
 News Source: Indian Express

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