It was July 2023 during India’s Goods and Tax Council (GST)’s 50th Council Meeting when it was announced that online gambling operators will have to pay 28% taxes on full-face bet value rather than their gross gaming revenue (GGR).
Interestingly, this happened before any specific legislation regulating online casinos was imposed. As of today, India’s gambling market remains in the grey area and only a few states have regulated online gambling activity.
The Appeal of Online Gambling To Indians
Based on recent reports, there are around 140 million Indians who gamble online regularly. Many would play at popular online casinos like Bitstarz, Casumo, and Wazamba. Players have spent some time playing popular casino games with locals including card games like poker, Teen Patti, Andar Bahar, and blackjack, as well as other gaming options here.
Since India is also a big fan of sports, it’s not surprising that many of them have also turned to online sports betting. Some of the popular sports betting sites include Parimatch and 10CRIC.
Cricket remains the most wagered on sport, especially during major events like the Indian Premier League and the ICC’s World Cup. However, more and more locals are also placing bets on sports like football, kabaddi, and even horse racing.
The convenience of accessing a wide variety of games and betting markets from the comfort of their home is a major draw. After all, regulated gambling houses in the country are only available in certain states.
Taxation of Online Gambling in India
As mentioned earlier, the 28% tax is applied on bets instead of the total revenues of online gambling operators. This also covers the states where land-based casinos are allowed like Goa and Sikkim. Taxes are applied to the value of the chips that players purchased in person.
These rates apply to both skill-based and chance-based casino games.
Also, even players are to be taxed 30% of their gambling winnings that exceed INR 10,000. So, operators need to make sure that they deduct the amount before they issue the winnings to a player’s account.
The introduction of these taxes has been met with mixed reactions from the industry. Many operators have expressed concerns that high tax rates could stifle the growth and innovation in the iGaming sector.
All India Gaming Federation (AIGF) was one of the groups that expressed its thoughts regarding high taxes. In their statement released after the announcement of GST last year, AIGF said:
“This decision will be extremely detrimental to the entire Indian gaming industry, with the GST on deposit increasing liability up to 400-500%, and will lead to lakhs of job losses. At this valuation of taxation, companies will be paying more in taxes than they will be generating in revenue.”
They also expressed their worries that players will then be forced to play at illegal offshore gambling sites to avoid the taxes.
“The implementation of the Council recommendation will disproportionately impact a large number of MSMEs and startups. It will make it challenging for them to survive,” they explained.
No Changes After Six-Month Review
Many have hoped that GST would eventually change the tax rates, especially once they see a clearer picture of how it impacted the industry after imposing the law. However, since operators were left with no choice but to comply, they have seen growth in gambling revenues instead.
According to India’s minister of finance and corporate affairs Nirmala Sitharaman, since the tax was imposed, online gambling revenues grew 412% from November 2023 to April 2024. Revenues were able to reach over $8 million.
Even land-based casino revenues also increased 30% during those six months and reached a value of over $25 million.
The minister was then asked whether the tax hike is now accepted by the operators. Sitharaman only said, “The council heard the facts and that’s where it was left. It was more of a presentation of the current situation. That was a promise that was given to review [the taxation] after six months. It’s been more than six months now and we have given [them] a picture.”
Conclusion
So, there will be no changes to the tax percentage yet. According to iGaming Business, it seems like even if operators have been paying the taxes, the industry is suffering.
Before the taxation, the local gaming sector attracted over $2.6 billion in foreign investments. This remained unchanged since last year, and it will likely remain the same if the same taxes will still be charged in the coming years.
However, it does seem like this will remain the same for a while. If anything, India should probably focus on regulating online gambling first to ensure the safety of the consumers. Maybe after that, they could review the taxes to be charged to both operators and players.
