Sunday, June 16, 2024

Online gaming rules provide clarity, will bolster innovation and growth

The amendments in the IT rules for the online gaming industry, which have been formulated and finalized after extensive public consultations by the Ministry of Electronics and Information Technology (MeitY) in a short period of time, is a significant positive development for the online gaming industry. The notification of these rules sends a strong signal from the central government to mainstream online gaming, in line with PM Narendra Modi’s vision of making India a global gaming innovation hub.

Online gaming has been a sunrise sector with many entrepreneurs and start-ups developing innovative content and formats in gaming that have rapidly captured consumer interest.

The rules for online gaming, which are expected to be included in the Information Technology Act 2021, comprehensively define online gaming, including real money gaming, as separate from gambling and betting. Crucially, these will help curb the proliferation of illegal offshore gambling and betting platforms that do not prioritize consumer interests. This policy clarity is extremely critical and much appreciated by the sector. It will not only strengthen investor confidence, but also allow legitimate domestic gaming platforms to innovate and grow, further bolstering the sector. The ministry’s efforts to engage with consumers and industry representatives have been extremely inclusive.

The regulatory framework brings to the fore consumer protection including child protection and responsible gaming, which has been a key priority for the legitimate domestic gaming sector. Critical issues like addiction and user harm will be addressed by these rules as the industry adopts a responsible gaming charter with a strong focus on safeguarding the players against malpractices. As members of the E-Gaming Federation (EGF), we have been following the very robust EGF Code of Conduct, which includes practices like age-gating, daily and monthly deposit limits, prohibition on using bots, random-number generation (RNG) certification and other internationally accepted rules to enable a safe, transparent and responsible environment for players. The rules released by MeitY, which are very much in line with the EGF code of conduct, will ensure that every industry player moves in this direction.

The online gaming rules seek to achieve the above goals through the creation of self-regulatory bodies (SRB). A welcome inclusion is the allowance for multiple SRBs, which will enable the industry to represent the varying nature and operational models of online games effectively. The rules require every real-money game in India to be registered with an SRB and for the SRB to notify Meity of the same. Such a registration process will require the SRB to verify that the game is compliant with all applicable laws in the country, and is following all the rules with regards KYC, consumer protection and responsible gaming. Once a real-money game is verified as permissible and registered by an SRB, the online gaming intermediary will be allowed to host a registration mark on its game. Consumers will be protected from illegal and unscrupulous operators, while legitimate operators will see a broadening of their market as consumers develop more trust in the industry, and the government would see substantial reduction in leakage of tax revenues to offshore operators. This will also address state-level ambiguities and lay to rest issues raised by various state governments on the legitimate gaming platforms.

In this context it is also noteworthy to recognize the recently implemented amendments to the Income Tax Act with respect to TDS for online gaming and specifically the exclusion of online gaming from section 194B, thereby clearly decoupling it from betting and gambling. It demonstrates the government’s commitment to creating a fair tax system for the online gaming industry.

Overall, the policy framework for the online gaming sector is starting to take a concrete shape that will support this growing industry while ensuring that the interests of the consumers are always at the forefront. As an industry, we are hopeful that the government will continue to take the same constructive approach to the industry in the next GST council meeting and continue the regime of GST on operator revenues (GGR) and not on total entry amount. This will position the online gaming industry at the forefront of the digital economy and set it up to be a $20 billion industry by 2030.

The author is co-founder & co-CEO, Games24x7.

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