7 Jul 2016

Nagaland govt notifies Online Skill Games Rules, to issue LOIs very soon [Exclusive]

Exclusive The Nagaland government has notified the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016 (“Online Games of Skill Rules”). As per information received by Glaws.in, the Rules were notified and published in the official gazette on 12th May, 2016.

Further, sources have indicated that the government has initiated the process of accepting applications and is slated to issue Letters of Intents (LOIs) to at least four companies as per the Rules. Following are the salient features of the Rules and guidelines issued by the state government for obtaining the license:

Licensing process

  • Any person, firm or company desirous of obtaining a license has to apply to the Nagaland government in a prescribed format along with an application fee of fifty thousand rupees.
  • Only persons or companies who do not have a criminal record or those that have not indulged in gambling are eligible to apply for the license.
  • The controlling stake and executive decisions of the applicant have to be made within India.
  • The state government has to forward the application forms for the license to empanelled firms, i.e. law firms, chartered accountants, financial experts and IT firms of repute to scrutinise and certify the application and simultaneously grant an LOI to the applicant.
  • In case of refusal of the empanelled firm to give certification to the applicant, he/she can approach an expert committee constituted by the Nagaland government comprising of government officials and external persons to reconsider the decision. An ad-hoc committee of 3 persons (one government official, one online gaming professional and one person associated with sports in Nagaland) is contemplated to perform the functions of the expert committee, until it is notified and constituted.
  • The Licensing Authority (i.e. the Finance Commissioner or any other designated government authority) is not bound by the recommendations of the empanelled firms or expert committee.

Licensing fees and taxes

  • The fees for the license is Rs. 10 lakhs per game per annum or Rs. 25 lakhs per annum if a applicant wants to offer a bouquet or variety of games. The license is valid for five years and a provision has been made to double the license fee after the first three years, i.e. Rs. 20 lakhs per game per annum or Rs. 50 lakhs per annum for a bouquet of games.
  • In addition to the recurring license fee, the license-holder also has to pay a gaming tax/royalty of 0.5% of the gross revenue generated, minus any service tax, bonuses, cashbacks, payment gateway charges etc.

Dispute resolution and other conditions

  • The procedure for resolving any disputes between the expert committee and licensing authority or any aggrieved applicant is through a single arbitrator appointed in accordance with the Rules and Arbitration and Conciliation Act, 1996.
  • Certain guidelines such as non-acceptance of minor players, ensuring compliance with Know Your Customer (KYC) and Anti-Money Laundering Norms, non-acceptance of foreign deposits etc. have been inserted to ensure protection of consumers.
  • Additionally, the license holders have to deposit monies generated from the online skill games website into a designated account mandated by the Nagaland government. The license holder is also expected to provide a statement of accounts to the government. It is unclear whether the state government can access the accounts operated by the license holder.

Given the stringent conditions imposed by the Nagaland government, including comparatively high rate of fees and taxes as well as some ambiguity surrounding the process of awarding licenses, many in the gaming industry remain sceptical of the desirability of obtaining the license.

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