Emerging markets & culture
recommendations to the GST Council, which is a body comprising Central and State Government representatives that makes recommendations to the Government on GST laws. The recommendations of the GoM is being keenly observed, as it will have a significant business impact on the industry as a whole. GST is applicable at a rate of 28 percent on games of chance, and the skill gaming industry pays 18 percent GST on the commission or gross gaming revenue (GGR) (i.e., the fee charged by online gaming operators), as market practice. The GOM is in the process of assessing whether (1) GST should be charged at the rate of 28 percent on both games of skill as well as games of chance, and (2) whether it should be on the entire amount which a player deposits for a game, or on the commission amount. The industry view has been to continue the existing GST framework (i.e., GST at 18 percent on the GGR) for online skill based games. As per latest news reports, the GoM has not reached a consensus, and is seeking legal opinions on the issue . In the interim, certain skill gaming companies have received notices from GST authorities, alleging tax evasion and seeking payment of GST, calculated at the rate of 28 percent of the entire deposit amount, instead of 18 percent on the commission amount. These notices have been challenged before the High Court. c) AVGC Task Force In April 2022, the Ministry of Information and Broadcasting (“MIB”) set up an Animation, Visual Effects, Gaming and Comics (“AVGC”) Task Force, comprising Central Government bodies, industry representatives, and State Governments, to boost industry potential through various skilling initiatives and Government incentives. The AVGC Task Force will frame a national as well as state AVGC policy, which will recommend curriculum in AVGC sectors, facilitate skilling along with academic institutions, enhance employment opportunities, enhance exports and recommend financial incentives to attract foreign direct investment (“FDI”) in the sector. ADVERTISING BODY AND MIB INCREASES SCRUTINY OF GAMING ADVERTISEMENTS In the last few years, there has been a proliferation of
advertisements for gambling/sports betting platforms, surrogate advertisements for sports betting platforms, and misleading claims of winnings, etc. even in skill-gaming advertisements. Indian regulators have taken note of these issues and introduced regulations and advisories against such ads, as we discuss. However, first it is important to understand the applicable regulations. • State anti-gambling laws: Most state anti-gambling laws prohibit the offering and advertising of gambling products (i.e., games of chance)10. Sports betting is regarded as a gambling activity in India and accordingly, advertisements for sports betting are prohibited in most states. However, if a game qualifies as a game of skill, advertising such games is permitted in most Indian states. The question of extra-territorial applicability of state laws still remains open. However, at least with respect to advertisements, because of the action taken by various regulators as specified below, this issue may remain as an academic discussion. • Advertising Code: The Cable Television Network Rules, 1994, prohibits 11 broadcast advertisements that tend to incite people to crime, or which cause disorder or violence or breach of law, or presents criminality as desirable. Since gambling (games of chance) are prohibited under state laws, broadcast advertising of such products could violate these provisions. These provisions are applicable to other broadcasting companies as well. • ASCI’s Gaming Guidelines: The Advertising Standards Council of India (“ASCI”), India’s apex self- regulatory advertising body, released the ‘ASCI Guidelines for Online Gaming for Real Money Winnings,’ which prescribe guidelines for advertisements of real money gaming. These guidelines require advertisers not to target minors, carry disclaimers, and highlight financial risks involved in gaming. MIB subsequently issued a press release 12 on December 4, 2020, advising all broadcasters to adhere to the ASCI Gaming Guidelines in respect of advertisements on television. The ASCI’s guidelines are legally binding only on broadcasters, and not for advertisements through other modes of communication/non-members. • Misleading Advertising: The Consumer Protection Act, 2019 (“CPA”) prohibits misleading advertisements 13 . The Guidelines for Prevention of Misleading Advertisements
10 For example, Section 12 A of the Bombay Prevention of Gambling Act, 1887 provides that ‘A Police-officer may apprehend without warrant any person who prints, publishes, sells, distributes or in any manner circulates any newspaper, news-sheet or other document or any news of information with the intention of aiding or facilitating gaming. Similar prohibitions also exist in the Gaming Enactments of the states/union territories of Dadra and Nagar Haveli, Daman and Diu, Goa, Gujarat, Karnataka, Maharashtra, Meghalaya, Puducherry and West Bengal. 11 Rule 7, The Cable Television Network Rules, 1994 (Advertising Code). 12 https://mib.gov.in/sites/default/files/Advisory.pdf. 13 Section 21, CPA.
16 • IMGL Magazine • November 2022
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