Online Harmony: Budget 2024 Calls for Legislation in the Gaming sector

Introduction and Significance

The Indian gaming sector has seen fueling expansion and propelling into one of the biggest global markets in the last decades. It is primarily characterized by a robust ecosystem of homegrown start-ups and an estimated compound annual growth rate of 27% (approximate), indicating substantial economic potential. The convergence of AI with e-gaming projects the addition of 300 USD to India’s GDP by 2026–27, a noteworthy milestone in India’s digital evolution. The gaming community consists of 42.5 million gamers, second only to China globally. Furthermore, 400+ gaming entities are presently flourishing across India, including Infosys Ltd., Hyperlink Info System, Fgfactory, Zensar Technology, and others. Thus, this sector truly thrives within a stable regulatory and legal framework.

In the celebrated judgment of the Supreme Court, K. R. Lakshmanan v. State of Tamil Nadu, it was highlighted that online gaming is different from online gambling. The former is based on the element of skill; later, it includes those activities that require the element of chance.  In the colonial era, it was initially regulated through the Public Gambling Act of 1867 all over India; however, many states have enacted their own gambling laws for their territory.

Existed Legislation

IT Act, 2000

It was enacted to combat cyber attacks targeting both online game platforms and players due to its substantial revenue. The notification introduced to govern online gaming emphasizes a self-regulatory body verifying real money games and safeguarding fraud, addiction, and financial risk.

IT (Intermediary Guidelines and Digital Media ethics code) Rules, 2021

The government will establish a three-tier dispute resolution machinery for a grievance redressal system for regulating the gaming platform.

RBI considering verification of the users, i.e., KYC (know your customer) by FinTech companies, the online gaming intermediaries shall verify the players before accepting the first deposits in cash or kind in any permissible online real money games.

Prohibition of online games related to gambling, including direct or indirect online advertisement or promotional content in social media by media entities

Taxation

Group of Ministers (GoM) to review the goods and services tax (GST) on online gaming attract 18% for casinos, and horse racing draws with the 28% tax on gross gaming revenue (GGR)

Interim Budget 2024 Calls to address Gaming Industry challenges

• Establishment of specific regulations aiming to clarify the ambiguity surrounded by video games and real-money games.
• Implementing strategic moves to increase investment in digital infrastructure, especially in the expansion of internet connectivity, with a specific emphasis on the deployment of 5G. Thus, we need an initiative that would not only augment the digital connectivity landscape for gaming apps but also foster the adoption of digital payment modes like UPI.
• We need to emphasize the significance of backing initiatives that safeguard and monetize intellectual property (IP) within the realm of creative gaming content, as it is crucial to ensure the protection of innovative ideas, original creations, and artistic endeavors in the gaming segment.
• Recognizing e-sports as a legitimate sport and sustaining its infrastructure for the development of the gaming sector.
• Creation of government-backed incubators tailored for gaming startups, which could significantly contribute to harnessing the inventive enthusiasm of the youth towards innovation.
• Budget 2024 to support sector-specific game-up skilling, provide a notable feature of tax breaks for global players investing in the burgeoning Indian market, and allocate substantial funds for AI research and development.
• The retail industry anticipates a reduction in GST rates for retail products to enhance affordability, encourage consumer spending, and fuel demand, as well as tailored policies to address the financial imbalance stemming from an inverted GST structure.
• Government initiatives to drive digital literacy will accelerate the adoption of digital payments.