India’s legal gambling industry faces decline following implementation of 28% tax

Posted on: May 18, 2022, 8:58 a.m.

Last update: May 18, 2022, 8:58 a.m.

India is in the process of updating tax rates for gambling activities across the country. Higher rates are coming, which could lead to an attrition of legal options and an increase in black market alternatives.

Conrad Sangma, Chief Minister of Meghalaya
Conrad Sangma, the chief minister of the Indian state of Meghalaya. He led a group of ministers who suggested raising the GST rate on games to 28%. (Picture: Indian Express)

The Goods and Services Tax Council has tasked a group of ministers to review the taxation of gambling, racing and online casinos. They have completed the review, and the results are not favorable to the industry. They agreed to levy a 28% Goods and Services Tax (GST).

The group, led by Meghalaya Chief Minister Conrad Sangma, reached a consensus that the tax should be based on gross gambling revenue, according to the India time. This is a break from the norm, which charges tax per transaction or per bet amount.

Final details to come

The GST rate for online casinos, gambling and betting is currently 18%. The same applies to all games that do not involve gambling activity. Additionally, there is an 18% tax rate on commissions that online gambling platforms earn from each game.

The group of ministers will deliver a final report within the week. The report will contain recommendations, as well as concerns. The current bill would stipulate the new tax rate even on e-learning games, an idea that is facing resistance.

The TPS Board will discuss the results and provide any suggested changes at its next meeting. This meeting will probably take place before the end of the month.

Ministers had met earlier on May 2 and there was consensus on a fixed rate of 28%. However, there was no consensus on whether gross gaming revenue should be levied or whether the tax should be applied per transaction.

The GST Board must give final approval to the recommendations before India makes any changes. Council members will discuss the matter and make the final decision.

Damage the industry

India has always struggled to figure out how to approach gambling, but the new tax rate is going to cause serious problems. Gambling operators point out that a high GST rate would make online gambling unviable.

The Internet and Mobile Association of India (IAMAI) recently petitioned the GST Board to maintain the 18% rate for online gambling. In an official statement, IAMAI said any increase in rates would be detrimental to the overall health of the industry.

He warned that the increase would negatively impact the country’s economy and result in loss of revenue generation, livelihood creation and foreign investment. The statement also says it is unclear whether the GST rate hike will apply only to real money or casual games, as the latter is a sub-segment of online gambling.

The increase could lead to a total shutdown of the industry. This in turn would lead to the loss of many jobs and loss of investor confidence. As a result, it would weaken India’s online gaming industry, which is growing exponentially” by 35% CAGR.

In addition, the entity believes that the GST cannot be increased legally. He referred to the 2017 CGST law, highlighting an article that indicates that the regulation sets the rate at 18%. It indicates that the tax applies to gross gaming revenue or platform fees. The law adds that only a kitty can have a different TPS, according to IAMAI.