Of the innumerable things Covid has changed in our lives, it is evident that we have also found ways to entertain ourselves. There was an accretion of Over the Top(OTT) Channels but what has gone unnoticeable is the rise of players playing online games. The Online gaming industry has grown leaps and bounds in the last decade in India where Gen Z and millennials have played games like Catan, Monopoly, Ludo, Tambola through online applications which has impaired normal socialisation, physical and mental harm and even monetary loss. Children played these games due to peer pressure and sometimes spend money to acquire the “assets” inside the game. This has led to wastage of national resources and also wastage of productive time by the players.
According to the statistics provided in the Statement of Objects and Reasons in the proposed Bill which has been introduced to regulate Online Gaming in India , India has around 420 million active online gamers and the industry is slated to grow to $5 billion by 2025 .
The Online Gaming (Regulation) Bill, 2022 (herein after referred as “The Bill”) was introduced in Lok Sabha on 1st April, 2022 by Adv. Dean Kuriakose, a congress member from Kerala as a Private Member’s Bill. The Bill aims to maintain integrity in online gaming and introducing a regulatory regime for online gaming.
The Bill has proposed to establish an Online Gaming Commission (under Clause 3 of the Bill) which is to be constituted by the Central Government. The gaming operators will be required to obtain a license from the Gaming Commission. The Commission shall have the following functions:-
- To oversight the functioning of online gaming server
- To make periodical or special reports to the Central Government on any matter pertaining to Online Gaming
- To suggest appropriate measures to control or curb illegal Online Gaming
- To grant, suspend and revoke licenses for online gaming websites and to determine fee for license applications and license renewals of such websites.
The Act applies to the any person who has been granted a license to install and operate Online Gaming Server and also on player who is a participant of any Online Gaming.
- Section 2(d) defines “licensee” which means any person who has been granted a license to install and operate Online Gaming Server, and any other activity to facilitate Online Gaming.
- Section 2(e) “Online Gaming” means games played on any electronics device including Personal Computers, Mobile Phones, Tablets and other devices.
- Section 2(f) “Online Gaming Server” means any main frame computer or set of computers, installed or maintained by the Licensee, that accepts, processes, stores and validates transactions arising out of Online Gaming, and which manages, monitors and controls the entire system of Online Gaming.
- Section 2(g) “Online Gaming Website” means the internet domain registration or URL address of the Licensee through which Online Sports Gaming is conducted.
- Section 2(h) “player” means a participant of any online game as certified by the Commission.
Mandates under the Bill: Key Highlights
- License for an Online Gaming Server: The Bill collates a system of licensing the online gaming server which empowers the Commission to grant, renewal, suspend and revoke licenses for online gaming servers. Any person desiring to obtain a license or renew that license shall make an application in writing to the Commission along with the prescribed fee.
Clause 7(1) states the validity of such license which is six years and Clause 9 envisages that the license shall not be transferable.
- Maintenance of Accounts: Every licensee shall maintain accounts relating to Online Gaming in a relevant form and also the same needs to submitted to the Commission, as prescribed stated in Clause 12 of the Bill.
- Foreign Direct Investment and Technology Collaboration: In times to come, through notification of the Central Government, Clause 16 of the Bill permits Foreign Direct Investment including technological collaboration, in Online Gaming, subject to any conditions or restrictions.
- Penalty: Clause 5(3) states the penalty provision that if any person who operates an Online Gaming Server or an Online Gaming Website without a license, shall be punishable with imprisonment for a term not exceeding three years and with fine, as prescribed.
Observation of Clause 13(1) is if any person other that licensee has committed a breach of any conditions of the License as exhibited or of the rules to be observed in playing such games, such person shall be punished with fine, as prescribed.
Clause 15 of the Bill envisions that all offences under this chapter shall be cognizable and bailable.
- Exclusions: The provisions of this Act shall not apply to a person providing backend services in India, including hosting and maintenance services, for any international gaming website based outside India, stated in Clause 17.
Recent Update- 28% GST Levy on Online Gaming
The GST Council’s decision is to levy 28% GST on turnover of online gaming has caused serious disruptions. This decision will have a chilling effect on the USD 2.5 billion of FDI already invested by investors and jeopardise potentially any further FDI in the sector. This change will require an amendment to be made in the GST Act for including the same under its scope.
The Councils decision will eliminate classification of online games as game of skill or game of chance and make GST rate uniform as 28%. This has come after Karnataka High Courts judgment in Gamekrafts case. Centre is set to file appeal against the same. Decision will shift users to illegal betting platforms which will ultimately leads user risk and loss of revenue to the Government which is estimated to 25,000 Cr. Rupees by 2027.
Similar efforts were put by Dr. Shashi Tharoor who had also introduced in the Lok Sabha, in December 2018, a similar bill called “The Sports (Online Gaming and Prevention of Fraud) Bill, 2018, which was sturdy and a slightly more comprehensive draft covering within its ambit sports fraud and betting, too. However, the Sports Bill lapsed with the dissolution of the 16th Lok Sabha, before the general elections in 2019.
Since the gaming industry has such a profound impact on the nation, it is necessary that it should be regulated and at the same time should guarantee safety of the players and their money.