Will India Impose the New 28% Tax on the Online Casino Market
The Indian online gambling sector has soared over the past years, and the second-most populated country has become one of the most promising markets. Players can find numerous domestic and offshore operators and enjoy all forms of online gambling. Since online gambling is still in a gray zone in India, a group of ministers has run the initiative to change tax policy. The new 28% tax rate on goods and services could reshape the Indian gambling industry, and we will analyze its potential impact on this fast-growing market.
How Can the Upcoming Tax Increase Impact the Indian Online Casino Industry?
Meghalaya Chief Minister Conrad Sangma and his panel got a task to prepare the taxation scheme for the Indian online gambling sector. After a period of examination, they proposed a 28% blanket tax rate be applied to all online gambling activities in India. It is quite a change from the current 18%, and the new model could heavily disrupt the industry, opening many controversies and questions for discussion.
The online casino market in India is experiencing steep growth, which the proposed tax model could hold back. Even bestcasinosites.net, the source of our analysis, expressed concerns since they would also experience negative impacts from this change. The Goods and Services tax rate hike created a backlash from the industry. Since this potential tax change has triggered many discussions, the final report submission has been postponed several times. The target date was pushed from 10th August to 17th December 2022, but GST hasn’t discussed the report yet.
The proposed tax change could introduce a huge disbalance in the Indian online gambling market. It currently consists of both domestic and offshore gambling companies. However, offshore operators won’t be affected by this proposal, and they could continue offering their services to Indian players. Many of them run their businesses in “tax heavens,” like Malta and Curacao, which have much lower tax rates. On the other hand, domestic gambling companies would be hit with a 28% tax rate, which would severely affect their businesses. Consequently, offshore gambling sites will dominate the Indian online gambling market, stifling domestic companies.
The New Taxation Model Proposal
The proposed taxation model raised many concerns even though it is still not implemented. A topic that triggered a serious discussion is the lack of categorizing gambling activities. The new tax proposal does not differentiate games of luck and games of skill. When casino players spin the reels of the online slot, play roulette or lottery, they rely solely on luck. On the other hand, online poker, blackjack, rummy, or fantasy games, require a certain level of player’s skill that affects the game outcome. Therefore, these two categories of casino games are considered differently from a taxing perspective in many jurisdictions. However, that’s not the case with the GST Council’s proposal.
It is one of the major discussions around this hot topic, and if the categorization fails to be implemented, both online casinos and players might be in a tougher position. On the other hand, offshore gambling companies could take another market advantage since they don’t fall under the jurisdiction of the Indian authorities. That’s why the question of casino games categorization is among the crucial ones in the discussion about the new taxation model.
Is the New Taxation Model Good for the Indian Online Gambling Market?
GST has already been introduced in many sectors, including freelancers, but the proposed taxation model will heavily impact all online gambling activities in India. The lack of casino games categorization from a taxing perspective would affect casino gaming, sports betting, fantasy games, horse racing, lottery, bingo, poker… In other words, all the popular gambling activities among Indian players. Since online gambling sites operate on specific margins that each type of gambling activity brings, it can severely affect their ability to generate profits. Therefore, this taxation proposal might trigger another dose of unfairness in the Indian gambling market.
The new model can also become a major factor of disbalance in the Indian online gambling sector. We have already stated that the online gambling market in India involves both domestic and offshore operators. Since the proposed taxation scheme would affect only domestic gambling companies, it would create unfair competition. On the other hand, gambling companies that operate from India would pay a 28% tax on revenue, while operators from different jurisdictions would continue to pay as low as 5% of taxes. It could quickly jeopardize domestic gambling businesses and push players toward offshore gambling sites.
Of course, this taxation change triggers a chain reaction, as it doesn’t only affect gambling operators. As we just said, offshore gambling companies could get the market advantage and consequently offer better conditions to Indian players. However, it creates another level of risk on the players’ side. Although they might get better perks at certain offshore operators, they could not count on legal help in case of any fraudulent activities from the operators’ side. Therefore, players should be more aware of the safety protocols when playing at offshore gambling sites. At first, they need to ensure to register their accounts only with operators who have obtained licenses from reputable regulatory bodies like the Malta Gaming Authority or the UK Gambling Commission. Indian gambling customers should beware of all social and financial challenges when playing at websites that don’t fall under the Indian authorities’ jurisdiction.
The Future of the Indian Online Gambling Market
Although these taxation changes have not been introduced yet, they could have a devastating impact on the Indian online gambling market. The online gambling sector is one of the fastest-growing in this country, and this proposal could shake its foundations. Obviously, it will have a major impact on domestic gambling companies, but they are not the only ones that could experience the negative effects of this change.
Players’ online safety would be more challenging to handle since they will likely perform their gambling activities at offshore companies. Since the Indian authorities don’t have jurisdictions in that area, gamblers could stay unprotected from fraudulent activities. Some gambling websites have already been reported to offer unfair games, where it’s impossible to win, or refuse to release withdrawals. Those who sustain their loyalty to domestic companies will play games with a low Return to Player rate. It’s certainly not a good situation for players, either.
Back to domestic operators, they need to be ready for a potential shockwave. Already established billion-dollar-worth Indian gambling companies will need to adjust their businesses to remain profitable. New operators will become more hesitant to enter these waters since fighting competition and keeping their businesses healthy will be very hard. Domestic operators could eventually be pushed out of the market and replaced by international gambling companies.
Eventually, the country might miss out on substantial tax revenue. Higher taxes don’t mean higher income if the market balance is not preserved. Therefore, authorities need to analyze this situation more thoroughly before applying any decisions.
With or without the new taxation model, gambling in India will remain popular. But, the major question is how the market will look like. Disbalance in this sector could affect all its participants, including the authorities, who could miss the opportunity to generate higher tax revenue. It is in everybody’s interest to apply a better model that will help this sector to grow and bring benefits to all parties involved – from gambling companies to players. This hot topic will remain attractive, and we’ll follow further developments.