By Rupin Chopra and Vidhi Oberoi
The online gaming market has become a powerhouse in India’s dynamic media and entertainment sector, as it combines innovation, engagement and economic potential. As per the Annual State of India Gaming report released by Lumikari in collaboration with Google, The Indian- Gaming Industry have spiked profit of USD 3.1 billion in revenue in the financial year (FY) 2023.[1]
In light of the burgeoning online gaming market, MeitY (Ministry of Electronics and Information Technology) through a notification dated January 02, 2023 proposed to bring provisions and regulations in the IT Rules for regulating Online Games and Online Gaming Intermediaries in India. On April 6, 2023, MeitY ultimately notified “The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules” (herein referred to as “Guideline”)[2] which came as a huge relief to the online real money gaming industry in India.
Following the new norms by MeitY, Google has been running trials and taking initiatives to bring in real-money games on its play store based on a service fee model for Real-Money Game apps.
Supervision of RMGs by Self-Regulatory Bodies under MeitY Guidelines
There are certain online games played for real money that are deemed ‘permissible’ as per the new Guidelines in India.[3] The regulation and approval of the permissibility of these games will be done by Self-Regulatory bodies (SRBs) recognized by MeitY. All the Gaming Companies involved in online real money games will have to reveal information about its policies in relation to protecting users’ deposits to its users. Prior disclaimers are necessary to all the consumers. The SRBs are also to look for creating framework for prevention of addiction and huge financial losses.[4]
Tax regime for the Real Money-Games
While MeitY provided some clarity by introducing online gaming rules in the first half of 2023, the industry faced a setback when the GST council imposed 28% GST on full face value of bets. The GST Council’s decision to levy 28% GST on real-money games got implemented from October 1, 2023.[5] Earlier, the tax regime was set to 18% as the platform fee for the gaming application.
Due- Diligence to be done by Online- Gaming Intermediaries (OGIs)
For the purpose of protection of online gamers, the Online Gaming Intermediaries (OGIs) have to adhere to Rule 3 of Guidelines. Rule 3[6] provides for due diligence to be followed by an intermediary on receipt of a user’s complaint and a grievance redressal mechanism for dealing with such complaints as well as Code of Ethics for Digital Media Publishers.
Further, Rule 3(1)(f) of the IT Rules, 2021 was revised by the 2023 amendment, which mandates that intermediaries post and notify users of any changes to their platform policies, privacy policies, or user agreements (Platform Policies) for OGIs on a regular basis (and at least once a year). Users must be notified by OGIs of changes to their policies no later than 24 hours after the changes take effect. The RMG companies should also conduct customer identity verification and due diligence of the background to prevent financial frauds and other risks.
Google’s Approach for Introducing Real- Money Games in the Indian Market
Google has been facilitating the distribution of Daily- fantasy sports (DFS) and rummy games applications created by Indian game developers through an application-only test initiative since September 2022.[7]
Developers and apps that were approved for the program can keep hosting their RMG apps on the play store after June 30, 2024. These apps can go beyond fantasy sports and rummy games on the plays store. In the future, Google intends to extend this policy to users in other nations as well.
However, Google is yet to release the service fee model for RMGs.
Conclusion
Real- Money Games is the new trending roar in the online gaming industry. However, the high risk of data leaks, confidentiality of the client and other cyber- crime requires a strict monitoring and regulating framework.
The SRBs coupled with proactive user awareness and prima facie the way forward. As far as Interpretation of RMG, as per the new Guideline, in Google’s play store is concerned; it is a test to time and patience to see how this will unleash a new era of Indian online gaming industry.
Aishwarya Rajput, Assessment Intern at S.S. Rana & Co. has assisted in the research of this article.
Related Article of SS Rana:
1. Fantasy sports games as ‘games of skill’:
https://ssrana.in/articles/india-fantasy-sports-games-as-games-of-skill/
2. How to obtain gaming license in India?:
https://ssrana.in/articles/india-how-to-obtain-gaming-license-in-india/
3.Raising the Stakes for Online Gaming:
https://ssrana.in/articles/raising-the-stakes-for-online-gambling-in-india/
4. How to offer online games involving stakes in India?:
https://ssrana.in/articles/legality-of-online-games-involving-stakes-in-india/
[2] Available at https://www.meity.gov.in/writereaddata/files/Information%20Technology%20%28Intermediary%20Guidelines%20and%20Digital%20Media%20Ethics%20Code%29%20Rules%2C%202021%20%28updated%2006.04.2023%29-.pdf
[3] [Updated as on 6.4.2023] Rule 2 (qe) of The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021; Available at https://www.meity.gov.in/writereaddata/files/Information%20Technology%20%28Intermediary%20Guidelines%20and%20Digital%20Media%20Ethics%20Code%29%20Rules%2C%202021%20%28updated%2006.04.2023%29-.pdf
[4] Available at https://www.meity.gov.in/content/draft-amendments-it-intermediary-guidelines-and-digitalmedia-ethics-code-rules-2021
[5] Available at https://inc42.com/buzz/online-gaming-28-gst-to-be-implemented-from-oct-1-to-be-reviewed-after-6-months/
[6] Rule 3: Due-Diligence by an Intermediary
[7] Available at https://support.google.com/googleplay/android-developer/answer/12918670?hl=en