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Services provided through an online platform (over the internet), which is essentially automated, involving minimal human intervention and services that are impossible to ensure in the absence of information technology are covered within the scope of “online information and database access or retrieval services” (“ OIDAR ”) and include online gaming. The rate of tax is 28% (for games of chance, i.e., betting/gambling) and 18% (for games of skill). The tax is levied on the service fee/commission charged by the gaming operators. Please note that the precise impact of the taxation structure will depend on the business/gaming model. 2.8 What are the broad social responsibility requirements? The majority of the Gaming Laws do not impose social responsibility requirements on operators as most of them have been enacted to forbid gambling. Though, under the Nagaland Rules, there are certain social responsibility requirements that the operators must follow when offering games of skill in the state – for instance, games for stakes can only be played by those above the age of 18 years. The Meghalaya Regulation of Gaming Rules, 2021 require operators to display a charter for responsible gaming wherever gaming activities are being conducted. In the absence of any concrete requirements, the Indian gaming industry has started regulating itself and prescribed standards for social responsibility. 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Under the Foreign Exchange Management Act, 1999 and its rules and regulations made thereunder (“ FEMA ”) read with the Foreign Exchange Management (Current Account Transaction) Rules (“ Current Account Rules ”), remittance (i) out of lottery winnings, (ii) for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes, etc., and (iii) of income from racing/riding, etc., or any other hobby, is prohibited. Skill games have the potential of being covered under the above provisions under the word “hobby”, as the same has not been defined or expressly categorised. The Payment and Settlement Systems Act, 2007 (“ PSS Act ”) mandates that a person desirous of commencing or carrying on a payment system must obtain an authorisation from the RBI. Payment service providers typically provide clearing, payment and settlement functions, which are highly regulated by the RBI. However, payment gateways and closed-loop wallets are not treated as payment systems. Under the Black Money (Undisclosed Foreign Income Assets) and Imposition of Tax Act, 2015 (“ Black Money Act ”), the Central Board of Direct Taxes (“ CBDT ”) issued a circular providing clarifications pertaining to the Black Money Act. The circular clarified that if an offshore virtual/e-wallet account is used for playing online games/poker and is funded by income chargeable to tax in India on which tax has not been paid and the person makes profit from the said gaming, the person must disclose the account details to Indian tax authorities. According to the circular, a virtual/e-wallet account is treated like a bank account where inward and outward cash movement takes place from the account. Therefore, the valuation and declaration of an e-wallet account may be made as in the case of a bank account. 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The state governments granted permission under the respective Gaming Laws. Though COVID-19 restrictions were reimposed during the devastating second wave of the pandemic in the country in April–May 2021, now almost all restrictions have been lifted. In September 2021, the state government of Goa permitted the reopening of casinos at 50% capacity with strict pandemic protocols only for fully vaccinated visitors or those carrying a negative RT-PCR report. While the threat of COVID-19 still persists albeit to a much lesser degree, in March 2022 the state government opened up casinos to 100% capacity to doubly vaccinated visitors or those carrying a negative RT-PCR report not more than 24 hours before their visit. The earlier ban on spas, massage parlours, river cruises, EDMs and night clubs has also been lifted and 100% occupancy is permitted for doubly vaccinated visitors.
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