India is not the warmest place if you are a gambling company. The country is currently in the midst of discussing a legislative change that would increase the tax applied to online gambling operators to 28% of the face value of each bet. This is done to bring online gambling in line with casinos and horse racing, which are taxed at the same percentage.
New Tax Proposal on Online Gambling
Because the operational costs of the land-based industry are much higher, lawmakers now agree that online casinos and their gambling companies should pay at least as much, if not more, in tax. The proposal was first mentioned by Business Times, a local media outlet, and the changes in taxation will come as part of a new goods and services tax, or GST for short.
However, the news that India’s gambling industry (and online operators in particular) may see a tax rise is not entirely surprising. Finance Minister Nirmala Sitharaman has been looking into ways to adjust the gambling tax in the country and derive greater benefits for the public coffers. The idea right now is to have tax applied to the chips that are bought prior to gambling at casinos, and not on individual transactions. Meanwhile, the level of horse racing tax should remain the same at 28%.
The Ministry is looking for more input from stakeholders and industry experts who can provide it with how to best regulate tax. There have been concerns and pushback from some established verticals. Horse racing, which sees itself as one of the best regulated and most above-board, has objected that over-regulation is causing many gamblers to turn to offshore and illegal gambling markets.
Don’t Overregulate Paying Branches of Industry
One possible solution to ease the tax burden on the horse racing betting industry is to tax only the service fee or commission collected by race clubs, but this has not yet been the case. Goa and Sikkim, two of the states that allow gambling in several forms, have been collecting tax at 28% of the face value of bets.
This tax rate for the land-based industry was introduced back in 2017 and average revenue fell from INR18 million ($230,000) to INR7.2 million ($93,000) in 2022. It still remains unclear, though, how the 28% tax hike will be applied to online gambling, and whether it will concern the deposit, platform fee, or contest entry.