š® Online Gaming Industry in Trouble?
Online gaming is one of India's fastest growing industries but it needs regulation. Now the question is will this regulation help it or hinder it?
Cricket has become super monotonous.
No, we're not talking about the actual game. We're talking about the ads that come in between.Ā
Most of these ads are about online gaming platforms, with almost every Bollywood actor endorsing them.
But how legal are these games in India?
Well, even state departments are confused about their status.
So, it's time for regulation.
Curious? ReadOn!
š¤¹ Gaming Industry is No Childās Play
Gaming has come a long way since our Candy Crush obsession.
Thanks to Jio, everyone now has access to the internet.
And out of 846 million internet users in India, 433 million play online games.
And while there are hundreds of kinds of online games, a major chunk of this crowd is attracted to real money games.
Real money games are those where youāre not just playing for a score or rewards, you are playing for cold hard cash.
These games involve fantasy sports (like Dream 11), online poker, rummy, and even Ludo.
Wait, isnāt this basically like gambling? So, shouldnāt these games be illegal?
Well, thatās the interesting part.
Technically, our law doesnāt say anything about online games and online gambling.
So, the Supreme Court has classified these games into two: Games of Skill and Games of Chance.
Games of Skill are those where you need some strategy, knowledge or skill to win: like rummy, poker and fantasy sports.
These games are fully legal and they attract only 18% GST.
Games of Chance are games where you win or lose based completely on luck.
These games lie in a grey area and attract 28% GST.
Now, the problem is a lot of these games of skill are also fuelling gambling addiction in India.
Psychologists have claimed a 15%-20% increase in people seeking treatment for gambling addiction.
And while many are seeking help, others are giving in to their addiction completely.
For instance, a CA in Mumbai stole Rs. 15 crores from his office to fuel his addiction. Sadly, he lost it all. Many others who have tried to get rich quick through online gaming have fallen into debt traps and committed suicide.Ā
Tamil Nadu alone has registered 17 such cases recently, which has prompted the state to ban online gaming.
Meanwhile, many of these apps are doing whatever it takes to keep gamers hooked.
They offer gamers free cash in their gaming wallets to get them started on their gaming journey and offer them easy wins in the beginning.
Some also keep part of the winnings in the gamerās wallet only so they have no option but to use it for playing.
But allās not peachy for the industry. It has also been facing major issues.
š„ Gaming Industry's Troubles
Since these games are in a regulatory grey area, a lot of these companies are spending their time fighting lawsuits and bans.
And even though the Supreme Court has recognised rummy and poker as games of skill, many others donāt: like the GST Council.
Which is why it recently sent a show cause notice to GamesKraft, demanding Rs. 21,000 crores in due taxes.
This amount was calculated at a 28% GST rate, which GamesKraft claims goes against the Supreme Court ruling.
Now, the GST Council is further set to decide on how these companies should be taxed. If they decide to raise taxes, there could be more trouble ahead.
To add to all of this, gaming companies are facing strict competition from offshore betting platforms that are illegal in India. The Indian gaming industry is losing approximately $20-25 billion to these offshore companies that mostly run scams.
š§ How Regulation Can Solve Things
A regulatory body for the gaming industry could once and for all decide which games are legal, and how much tax should be levied on them.
This will end the constant bans and lawsuits.
Second, it could also ban offshore betting companies that are cheating users, making the space a bit more safe.
Third, many users and companies are currently evading taxes. A regulatory body could make sure they are complying.
Fourth, gambling addiction has given this industry a bad rep. The regulatory body could take steps to correct this by allowing gamblers to block themselves from apps, allowing companies to block people who are showing gambling tendencies, and mandating companies to add users after a proper KYC process to ensure minors don't get addicted to these games.Ā
In short, regulation could help the industry prosper.
In fact, with proper regulations in place, India could become an eSports hub.
E-sports have become super popular across the world, with countries like Singapore and Saudi Arabia betting big on them.
India could be next in line. But that depends on the kind of regulations we impose on this space.
ā”In a line: Online gaming industry needs regulations to protect both the companies and users but strict regulation could stifle innovation.
š”Quick question: Are online card games skill-based games or chance-based games?
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