Five legal & regulatory developments that online real money gaming industry should expect in 2023

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The year 2022 started on an optimistic note for the gaming industry with clarity expected on legality and regulation of online gaming.  While 2022 could not give the much needed regulatory clarity, the momentum created in 2022 is expected to get to a fruitful conclusion in 2023. Here in this post we list down the five legal and regulatory developments to be expected in 2023:

  1.  New rules by MEITY

Ministry of Electronics and Information Technology (MEITY) got designated as the nodal ministry for online real money gaming in this week and the ministry is reportedly in final stages of notifying the draft rules to regulate online real money gaming entities. The grape vine is that MEITY will introduce age verification mechanism and KYC norms for real money games. Many of the industry stakeholders have urged the government to provide a soft touch regulation. One of the sources added that as part of the regulation, gaming platforms would also be required to display a warning after a specific amount of usage in order to lower the risks of addiction. All this will now be fructified in the new year 2023.N

2. New TDS obligation

Online gaming winnings may be subject to more stringent income tax scrutiny. According to reports, the Finance Ministry is evaluating the current income tax laws governing online gaming and may broaden their application so that players who win less than Rs 10,000 in such games may also be included in the tax deducted at source (TDS) bracket. This may be introduced in upcoming 2023 budget.

3. GST Council decision on real money gaming, casinos and racecourses

The industry expected the Group of Ministers (GoM) headed by Meghalaya Chief Minister Conrad Sangma to settle the issue of tax slabs and valuation aspects in 2022. However, the GoM failed to arrive at consensus and the matter will now be discussed by the GST Council in 2023. With government seriously considering regulations of online gaming in all spheres, the GST ambiguity is also expected to cleared in 2023.

4. Andhra High Court decision on constitutionality of gaming ban law

Andhra Pradesh is the second state after Telangana to enact a online gaming ban law. The High Court recently heard arguments in the constitutional challenge to the law and is expected to deliver the decision in 2023. Considering two High Courts have ruled in favour of gaming companies in relation to similar laws, the Andhra decision may also be expected on similar lines. In case of surprises, the decision will be used by the State governments before the Supreme Court. The appeals by Tamil Nadu and Karnataka are currently pending before the Supreme Court. Telangana recently sought transfer of a similar petition from High Court to Supreme Court.

5. Gameskraft GST challenge before Karnataka High Court

In later half of 2022, Gameskraft dominated the industry headlines by receiving a tax notice of INR 21,000 crores from the department. The gaming company has challenged the notice before the Karnataka High Court. Several entities including gaming federations impleaded the case to argue against the interpretation GST department treating entire amount as bet amount. The decision is now reserved and is expected anytime soon.

The year 2023 is expected to be busy from regulatory perspective. With general elections in first half of 2024, the Modi government is expected to clarify on issues plaguing the sector. The Sports Ministry may come up with regulations concerning eSports while States like Rajasthan, Chhattisgarh, Tamil Nadu may bring in new laws to regulate or ban online real money gaming.