India Explores Distinction Between Online Games of Skill and Games of Chance to Attract FDI

by Annabelle Stephenson
in $$$
on 20 August 2024

India’s Department for Promotion of Industry and Internal Trade (DPIIT) is seeking clarity on the classification of online games as either “games of skill” or “games of chance” to attract foreign direct investment (FDI). The DPIIT has circulated a note among different ministries to gather opinions on this matter. It is crucial to define the distinction between the two categories in order to tap into the enormous potential of online games of skill.

During his address on India’s Independence Day, Prime Minister Narendra Modi urged Indian professionals to lead the global gaming market and establish the country as an industry leader. He highlighted the importance of Indian talent dominating not only in gaming but also in game production, leveraging the country’s rich cultural heritage.

Certain objections have been raised by various quarters as online gaming is often associated with gambling and betting. The challenge lies in determining the authority responsible for defining these categories. The official stated the need for an independent body to assess and define what qualifies as a “game of skill.”

The Indian gaming industry is experiencing rapid growth and expansion. With India being the fastest-growing mobile gaming market, the annual revenue of the overall gaming industry is predicted to nearly double from USD 3.1 billion in 2023 to USD 6 billion by 2028. A joint report by the Interactive Entertainment and Innovation Council and online gaming firm Winzo revealed that there are over 1,400 gaming companies in India, including 500 gaming studios.

To regulate the industry, the GST Council has established that a 28% Goods and Services Tax will be imposed on entry-level bets placed on gaming platforms and casinos.

This move by the DPIIT to seek clarity on the distinction between games of skill and games of chance demonstrates India’s commitment to attracting FDI and promoting the growth of the online gaming sector. Defining these categories will provide a clear framework for investors and contribute to the development of a thriving gaming ecosystem in the country.

Additional fact: The online gaming industry in India is dominated by mobile gaming, with mobile games accounting for around 85% of the total gaming market in the country.

Important question: What is the difference between games of skill and games of chance?

Answer: Games of skill are those where the outcome is determined by the expertise, strategy, or skill of the player, while games of chance rely predominantly on luck or random events for the outcome.

Key challenge: The challenge lies in defining the criteria or parameters that determine whether a game is primarily a game of skill or a game of chance, as some games may have elements of both.

Controversy: The classification of certain popular online games, such as poker or rummy, as games of skill or games of chance has been a subject of controversy and legal disputes in India.

Advantages: Attracting FDI in the online gaming sector can lead to increased investments in infrastructure, technology, and job creation. It also provides opportunities for collaborations and knowledge-sharing with foreign companies, which can help in the growth and development of the industry.

Disadvantages: There is a risk of increased gambling addiction and potential negative social consequences associated with online gaming, especially if there is inadequate regulation and control measures in place.