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Issues with online gaming apps in India

  • Published
    28th Oct, 2022
Context

With the arrival of the Cricket season including the T20 World Cup followed by the IPL, the advertisements for online gaming apps are on the rise, which can be brutal for the Indian economy.

So, let us see what are the issues of Online gaming apps in India.

About

India’s Gaming Industry:

  • The country is the biggest market for fantasy sports globally, with over 13 crore users playing across over 200 platforms.
  • The government noted that the number of people involved in playing online rummy is on the rise.
  • India mainly puts online games into two broad categories to differentiate them.
  • The two categories are that the game is either a Game of Chance or a Game of Skill.
  • Game of chance (Gambling): Games of chance are all those games that are played randomly. These games are based on luck. A person can play these games without prior knowledge or understanding. For instance, dice games, picking a number, etc. Such games are considered illegal in India.
  • Game of skill (Gaming): Games of skill are all those games that are played based on a person’s prior knowledge or experience of the game. A person will require skills such as analytical decision-making, logical thinking, capability, etc. Some games might also require some initial training to win. Such games are considered legal by most of the Indian states.

What is the Economic issue with Online gaming apps?

  • Evading Taxes: Many of these apps are operating from outside the country and are involved in tax evasion.
  • Games of skill are taxed at 18 percent GST on the platform fee, while games of chance are taxed at 28 percent GST on the contest entry amount.
  • This means such apps are expected to generate revenue to the tune of $40-50 crore, but a significant portion of this amount never lands in the public exchequer’s account.
  • Threat to Indian Gaming apps: The situation of offshore online gaming platforms is in sharp contrast to their Indian counterparts which are facing serious challenges due to a lack of government regulations, taxation, and Google’s policy changes.

It is estimated that offshore gambling sites such as Dafabet, Betway, Bet365, Parimatch, Fairplay, and 1xbet are making the Indian online gaming industry poorer by at least $25-30 billion.

Are there any regulatory measures available in India?

  • Online gaming platform as a 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.
  • These platforms will also be treated as ‘reporting entities under the Prevention of Money Laundering Act, of 2002.
  • They will be required to report suspicious transactions to the Financial Intelligence Unit India.
  • As a State Subject under Schedule 7: Online gaming so far has been a state subject, but state governments have said they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state.

Issues in regulating the online gaming industry:

  • The issue in coordination: There is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country.
  • Also, the State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
  • Societal concerns: Stakeholders have highlighted a number of societal concerns that can arise from the proliferation of online games in the country.
  • There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country.
  • Absence of framework: There is currently no regulatory framework to govern various aspects of online gaming companies such as
  • Having a grievance redressal mechanism,
  • Implementing player protection measures,
  • Protection of data and intellectual property rights, and
  • Prohibiting misleading advertisements.
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