2024 Expectations- Is the online gaming industry in India ready for a fresh start-

2024 Expectations: Is the online gaming industry in India ready for a fresh start?

By Rajesh Mehta

The year 2024 promises to be an action-packed year by all accounts if the social, political, and economic news cycle of the past week is any cue. Especially for India’s fledgling online gaming industry, it could be the year when it finally emerges from a prolonged period of uncertainty, both from a regulatory and a taxation perspective. Early indications certainly point in that direction.The Hon’ble Supreme Court on January 08 issued a notice to the Directorate General of GST Intelligence seeking their response to the petitions filed by major online gaming companies challenging the retrospective tax demand. In parallel, the GST Department has decided to consolidate all related cases from various High Courts and bring them into the Supreme Court’s purview, aiming at a more unified approach to legal proceedings. This matter will likely bring closure to the tax overhang in the sector and pave the way for regulatory clarity from the Govt.As the nodal Ministry for the online gaming sector, the Ministry of Electronics and Information Technology (MeitY) made a noteworthy attempt in 2023 to regulate the industry. This effort was marked by the release of Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2023, which aimed to establish Self-Regulatory Bodies (SRBs). These SRBs were envisioned to evaluate and certify ‘permissible online games’ in India. However, despite applications from the industry, clarity on the way forward remains elusive six months later.

The hesitation in advancing with the SRBs could stem from the perceived lack of clarity between games of skill and games of chance. The Supreme Court and various High Courts have established jurisprudence on this matter, yet the challenge in making this distinction persists. Notably, academic studies, including one by Professor Tapan K. Gandhi from IIT Delhi and another by ISI Kolkata, have concluded that certain real-money games such as Poker and Rummy are indeed games of skill, requiring cognitive and other skills for success. Despite these findings and established standards for making the distinction between skill and chance, there is a palpable hesitation among regulatory authorities to embrace these conclusions.

Now, the Government faces a critical decision – crafting a regulatory framework that delineates online games of skill from games of chance. This framework could be shaped either through Self-Regulatory Bodies (SRBs) or via formal regulations and guidelines by MeitY. The urgency of this regulatory framework is underscored by its potential to shape the industry’s operational future and impact its growth trajectory.

The outcomes of the pending legal judgments on the constitutional validity of the retrospective notices will have a profound impact on the sector’s future, influencing its capacity to innovate, grow, and contribute to India’s five trillion-dollar economy aim. These decisions will determine whether the industry can realize its potential as a global gaming hub or whether it will face setbacks due to regulatory challenges.

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As the industry navigates these challenges, it is also important to consider the broader economic and social implications. We should protect the online gaming industry for its generation of valuable employment. It is also important for India’s startup growth and boom that gaming startups are supported and not lost to other countries. When India wants to become the startup hub, online gaming should be supported and should not kill such startups. As tax-paying companies, it is in India’s interest to not make regulations excessively harsh. As we await the crucial rulings of 2024, the industry’s future hangs in the balance, with the hope that favorable decisions will usher in a fresh start for the industry and propel it to new heights.

(Rajesh Mehta is an international affairs expert focusing on areas like market entry, innovation, geopolitics and public policy. Views expressed are personal and not necessarily that of financialexpress.com)