The introduction of a 28% Goods and Service Tax on gambling turnover has partially stunted India’s gambling market, at a time when increased access to smartphones had seen the online gaming market start to flourish. Industry backers hope that a Supreme Court challenge will see changes to the tax itself and halt retrospective action currently being brought by the government.
Under current laws, online gambling via international offshore sites is legal in India, although it is in a state of flux. Although some international casinos and gambling companies have withdrawn from the market, there are a lot of casinos and sportsbooks that are new for 2024. Sergio Zammit highlights the fact that the Indian online gambling industry is expected to see its value increase to just shy of $1 billion this year.
Despite the likely increase in industry value, the market has seen major players leave, with the high tax rates and disparate gambling regulations being the chief drivers behind these moves.
Until recently, India’s gambling sector was regulated primarily by the Public Gaming Act, which was introduced in 1867. The act allowed horse racing and lotteries but it levied a fine of up to ₹200 for those caught running physical gaming houses.
As online gaming gained popularity, the ban on public gaming houses did not explicitly cover online casinos and iGaming, which meant players were able to bet freely on international offshore sites and companies could establish gambling websites accessible to Indian players. And so they did. Companies including Bet365 and Betway offered their international services to keen Indian consumers.
In 2016, the Nagaland Bill was introduced. It regulated, effectively allowing, sports betting and games of skill. In the proceeding years, such betting was legal and did not face any extraordinary taxes. However, players do face a 30% tax on all winnings. Prior to April 2023, players only had to pay this tax on total winnings over ₹10,000 but changes to the rules mean that all winnings now face this levy.
The situation changed once again in 2023 when the country’s Goods and Service Tax Council announced a new 28% flat rate tax on forms of online gambling not considered skill games. This represented an increase from the previous rate of 18%, which was considered competitive within the international gambling sector.
Furthermore, the tax is levied against total bets placed, not against winnings or profits, making it one of the highest gambling tax rates in the world. According to critics, such a high rate deters many international companies from offering their services to Indian gamblers. It also prevents companies from reinvesting any money they make to expand their offerings.
The government has also issued retroactive notices totaling ₹1 trillion. Companies have received notices stating that they have been in breach of GST rules and are being hit with charges dating back to 2018, despite the new tax only seemingly being introduced last year. The move has been labeled as unconstitutional and unfair by some.
The retroactive action has caused significant shockwaves within the industry. Companies including Bet365 have withdrawn from the market, citing the high costs and uncertainty of the industry.
Both Bet365 and Betway withdrew from the Indian gambling market in 2023 and both cited the 28% GST rate as being the principal reason for their decision. In a statement, Betway’s parent company, Super Group, said “The newly effective tax rules make the Indian market no longer commercially viable for Super Group.”
Despite the threat of heavy taxes and backdated charges, there is some hope on the horizon for the Indian online gaming industry. The Supreme Court is hearing challenges to the new tax on 2 April. Major companies including Head Digital Works and Games 24/7 have been asked to submit their challenges to the tax, and the GST Council has been given two weeks to challenge the responses.
It is hoped, during the April hearing, the Supreme Court will overturn some element of the new tax. Possible changes include:
● A reduction in the tax rate, down from the high 28% levy.
● The tax is levied against a company’s gambling profits, rather than the total bets placed.
● Action to prevent the retroactive penalties and levies dating back to 2018.
Specifically, it has been proposed that the tax be levied against player deposits, rather than the total values of bets. Under the current rules, if a player places a bet, this would attract the 28% tax, regardless of whether the bet wins or loses. If the player wins and subsequently places another bet with the winnings, the company will be levied 28% on the new bet. The proposed changes would see the tax levied only against a player’s deposit, which means that the second bet would not attract the tax again.
Despite the difficulties being faced by the industry, many options are still available to consumers and gambling remains popular in the Indian market.
It is estimated there are 40 million online gamblers in India and one of the key drivers in online gambling in India has been an increase in smartphone access. In 2015, just less than 20% of the population had smartphone access, but in 2024 this figure is estimated at 75%. Forecasts predict that, by 2040, 96% of the population will have a smartphone. With increased smartphone access comes greater access to online gambling portals and casinos.
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