As of August 2023, the Indian Parliament has approved of a new law that will require a Goods and Services Tax (GST) of 28% to be applied to the full value of player deposits at online casinos, racecourses , and other gaming platforms. This new rule will be set into effect as of October 1st 2023.
These legislative changes have been announced a month after the decision was passed, and were recently announced by India’s Minister of Finance Nirmala Sitharaman during the 50th Council meeting. She noted that the decision to impose a new 28% GST tax on gambling was not created to damage the industry, but rather as a natural response to the fact that it would be morally questionable to tax gambling at the same rate as essential commodities.
When it comes to online gaming, the 28% GST tax will be applicable whenever wagering of some sort is involved. Needless to say, this would include operators offering no deposit casino bonuses , where there is a possibility to win money.
The GST 28% Tax’s Ripple Effect on Online Gaming
After the GST rules will officially set into motion after October 1st, players will be required to pay an extra 28 Indian Rupees (₹) for every ₹100 spent on a game. This tax is set to be levied on all online games that involve wagering, irrespective of whether they happen to be games of skill or chance based.
The online gaming industry has agreed that the new tax law will restrict their ability to invest in new games, with cash flow and business expansion impacted at all levels. The Fantasy Gaming industry, which is set to surpass ₹25,000 Crore in revenue by 2027 will also face major setbacks.
Robert Landers, CEO of The All India Gaming Federation (AIGF), which currently represents companies such as Nazara, GamrsKraft, Zupee and WinZO amongst others described this latest announcement as egregious, irrational and unconstitutional and noted that the decision would bypass the 60-year law by ‘lumping online skill gaming with gambling activities’. Expressing his concern with regards to the negative impacts this new law will have on the industry and its current employment rate, Landers also commented on the fact that the only institutions to benefit from this new tax will be ‘anti-national illegal offshore platforms.’
As per the official legislation, this new tax will apply any time wagering is involved, and not to any casual games host provider. Nevertheless, it’s relevant to keep in mind that as of now, online gambling and betting games will incur a 28% tax, while all other games will be taxed at a standard 18% on gross gaming revenue.
The GST vs Foreign Direct Investment
The Federation of India Fantasy Sports (FIFS)’s Director General Joy Battacharjya noted that the decision was set to negatively impact the current $2.5 billion foreign direct investment, while potentially jeopardizing any further endeavors in the future.
Apart from that, this decision could also cause players to seek out illegal and alternative gambling options, leading to potential loss and additional risk for the government. He also urged the importance to distinguish between skill-based games and gambling games at online casinos.
India’s E-Gaming Federation (EGF) also noted that an additional tax could cause taxes to exceed revenues, effectively stifling the gambling industry while simultaneously boosting black market operators at the expense of taxpayers.
Ashneer Grover, co-founder of BharatPe, a company that’s recently launched its own fantasy gaming company also slammed the recent government announcement, describing it as a ‘murder of the fantasy gaming industry.’
The GST Council Reacts
Talks about the hike in tax levies related to horse racing, casinos and online gaming had first been announced by Sitharaman earlier in July this year, following several deliberations with the Council. During a recent press conference, she noted also noted however that the Council was willing to conduct a performance review within six months as of October 1st. This implies that by then, all entities will have sufficient time to adjust their operations to reflect the new GST laws, irrespective of their views regarding tax.
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