India’s Legal Gaming Industry Faces Potential Decline From 28% Tax

Posted on: May 18, 2022, 08:58h. 

Last updated on: May 18, 2022, 10:09h.

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

Meghalaya chief minister Conrad Sangma
Conrad Sangma,, the chief minister of the Indian state of Meghalaya. He led a group of ministers that suggests raising the gaming GST rate to 28%. (Image: Indian Express)

The Goods and Services Tax Council tasked a group of ministers tasked to examine the taxation of online gambling, races, and casinos. They have completed the review, and the results aren’t favorable for the industry. They have agreed to levy a 28% goods and service tax (GST).

The group, led by Meghalaya Chief Minister Conrad Sangma, reached a consensus that the levy should be based on gross gaming revenue, according to the India Times. This is a break from the norm, which charges the tax per transaction, or for every amount of betting.

Final Details Coming

The GST rate for casinos, online gambling, and betting is currently 18%. The same applies to any games that don’t involve gambling activity. In addition, there is an 18% tax rate on commissions that online gaming platforms earn through each game.

The group of ministers will provide a final report within the week. The report will contain recommendations as well as concerns. The current draft reportedly stipulates the new tax rate even on online learning games, an idea that is facing resistance.

The GST Council will discuss the results and provide any suggested changes at its next meeting. That meeting will likely take place before the end of the month.

The ministers had met earlier on May 2, and there had been a consensus on a flat 28% rate. However, there wasn’t a consensus on whether gross gaming revenue should be levied, or if the tax should be applied per transaction.

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

Damaging the Industry

India has always had difficulty figuring out how to approach gambling. But the new tax rate is going to cause serious problems. Gaming operators emphasize that a high GST rate would make online gaming unviable.

The Internet and Mobile Association of India (IAMAI) recently asked the GST Council to keep the 18% rate for online gaming in place. In an official release, the IAMAI stated that any increase in the rates would be detrimental to the industry’s overall health.

It warned that the increase would negatively impact the country’s economy and result in a loss in income generation, livelihood creation, and foreign investments. The statement also said that it is unclear whether the GST rate hike will be applicable only to real money or casual gaming, as the latter is a sub-segment in online gaming.

The increase could lead to a total shutdown of the industry. This, in turn, would result in the loss of many jobs and investor confidence. As a result, it would debilitate India’s online gaming industry, which has been experiencing exponential growth” of 35% CAGR.

In addition, the entity believes that the GST cannot be raised legally. It referred to the 2017 CGST Act, highlighting a section that indicates that the regulations establish the 18% rate. It states that the tax applies to the gross gaming revenue or platform fee. The law adds that only a prize pool can have a different GST, according to the IAMAI.