By Charles Perrin
India has taken radical action to tackle the igaming industry by backdating outstanding unpaid taxes from online gambling operators.
The reported figure is believed to be around INR1trillion ($12billion) and the country feels it is entitled to claim from operators whom the government believes haven’t stumped up their fair share of taxes for years.
Only a couple of months ago, India decided to levy a 28% tax rate, however, gambling operators will need to pay up if they wish to avoid being blacklisted. The vagueness of the wording for the goods and service tax (GST) rate will have no doubt caused confusion and consternation throughout the gambling community, although it seems the rate will inevitably be the same for all operators.
As things stand, the rules of internet gaming fall under the remit of the amended Central Law on Goods and Services which covers a wide range of gambling activities, especially when it is expected individuals will place wagers with the aim of winning more money.
Previously, the initial GST rate was set at 18% and this entailed games requiring a degree of skill or expertise, such as rummy or fantasy games. But now the rate has climbed to 28%, and this covers games that are based purely on chance, including sports betting.
Perhaps unsurprisingly, the new tax plan has been met with some resistance from operators. More than 100 gaming companies and top investors such as Top Tiger Global and Peak XV, which was previously known as Sequoia Capital India, wrote formally to the government calling for the decision to be reversed.
Many operators have taken more drastic action and left to express their disapproval over the GST rate, which was co-ordinated by the Goods and Services and Tax Council, and has been in place since October 1.
However, keen industry observers have poured scorn on the 28% tax rate, labeling it too excessive for smaller operators who may struggle to survive. That said, a review of the original tax decision will be made within the next six months.
Although Indian gaming operators will have been trying to figure out loopholes and circumvent the existing tax rules, there is no disguising the fact that the igaming industry is booming, and it has swelled in size.
Yes, India has fast become a digital hub for igaming, and a report carried out by accountancy firm Ernst & Young showed that the sector grew over 35% in 2022 to hit INR135bn ($1.6bn), while transaction-based gaming revenue increased 39%. Moreover, this area of the Media and Entertainment sector is expected to reach INR231bn ($2.8bn) by 2025 at a CAGR (compound annual growth rate) of 20%.
Although the Indian igaming industry is still at a relatively nascent stage, the broad picture worldwide shows that gambling continues to flourish, with an explosion of new operators entering the fray. Moreover, it is thought the global gaming market could surpass the $100bn mark by 2032. The US is a major driving factor behind this inexorable rise, especially as new states are being added to the legalized gambling list.
But across the Atlantic, the rate of growth has been unrelenting. The UK, for example, has been a powerhouse for a number of years, and it boasts several operators who have expanded and have a huge presence overseas. Interest in gambling remains undimmed and while GamStop sites continue to hold sway, those gamblers looking to venture away from the norm and are clamoring for more flexibility should read these non GamStop casino reviews first for inspiration. Operators such as Winstler Casino and Goldenbet Casino are well-versed in delivering competitive bonuses, and they have a wealth of games in their respective libraries.
Although the Indian government will get some form of economic relief from the new gaming tax rate, there may well be some operators who will be unconvinced about how things will come to fruition.
No matter how India tries to sell the virtues of an increased gaming tax rate, it remains to be seen how this will translate into sustained revenues. It seems most likely that India won’t even see a minuscule amount of the GST it has levied, but if it keeps operators in line, then perhaps it may end up being the best solution moving forward.
