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India Demands $12 Billion From iGaming Operators in New Tax Plan
By Jeff Osienya Oct 26, 2023 IndustryIndia has been cracking the whip on offshore iGaming operators, demanding a whopping $12 billion in unpaid taxes. While the Asian nation is decrying lost revenue, some fear this move will squeeze the life out of its iGaming scene.India’s government is putting in place measures to enforce a new ‘fair tax’ that all iGaming operators in the country will be subject to. The plan is set to see gaming operators in the Asian country pay a combined INR 1 trillion ($12 billion). With this payout, the country’s authorities believe there is enough compensation from the operators to cover the taxes they had previously not paid.
The new 28% tax took effect on October 1st and has seen varying reactions from members of the public and the wider Indian gaming community. In the lead-up to implementing this new tax plan, India’s Goods and Services Tax Council (GSTC) unveiled a couple of measures geared towards the efficient implementation of the policy.
For starters, the Indian government mandated that all offshore iGaming operators operating in the country register their business within the country. Offshore online gambling entities that fail to heed this call would face the possibility of being blocked from running in India.
The move was made in light of a suspicion that some offshore online gaming companies operating in India enjoyed some form of tax arbitrage. As India starts implementing this highly controversial tax, the ripple effect is being felt, with operators facing the prospect of being blackballed if they do not play ball.
How the New Gaming Tax Will Be Applied
Whether an operator offers skill games or games of chance, the Indian government asserts that the Goods and Service Tax Rate (GRT) will be the same for all operators across the board. The Goods and Services Tax (GST) rate will apply to all the games that fall under the internet gaming banner.
According to the revised Central Law on Goods and Services, this definition is quite broad and will involve two major categorizations of online games and online gambling activities. As part of the implementation process of this new tax, amendments were made to the Integrated Goods and Services Act. One of the critical amendments to this measure also introduced a rule that offshore iGaming providers must charge a GST to all their users in India.
While the numbers quoted by the Indian government appear exaggerated and are aimed toward developing the iGaming industry, the current stats paint a rather dim picture of the move. According to the Directorate General of GST Intelligence (DGGI), many companies have been collecting revenue from India and have been taking the revenue outside India.
That said, Data from Statista from June indicates that India’s online gaming industry was worth around INR 135 billion ($1.62 billion) in 2022. So, to put it plainly, the revenue drawn from the industry does not justify the new tax being implemented. And as you can imagine, the India-facing operators have not taken kindly to the new tax, and some heavy moves are already being felt in the market as a consequence of the changing tides.
Reactions From the Operators
Indian gaming regulators argue that through the 18% GST incurred by the operators through their offerings, they have already been paying enough taxes to the Indian government. However, the government argues that this is only a small percentage of the revenue that the Indian iGaming operators earn.
Overall, the Indian government feels that the overall revenue of operators paints a more accurate picture of the operators’ financial well-being. With that in mind, all the games, whether luck or skill-based, will be subject to a 28% tax. Under the previous law, the system had in place varying GST rates depending on the type of online iGaming games.
Due to the new tax plan, there have been notable iGaming exits. One of the departures is the betting platform Super Group, which announced immediate withdrawal from the Indian market. SuperGroup is the parent company of known betting brands like Betway, Spin, and Hyperino and has played a significant role in the burgeoning of the young Indian iGaming market.
From the look of things, it is highly likely that SuperGroup may not be the only exit from the Indian iGaming market. It’s also worth pointing out that SuperGroup’s Betway had already been banned in India before the tax plan following the government’s recent crackdown on the online gambling scene. Operators like Parimatch also met the same fate that befell Betway.
Departing Operators Means a Likely Hit on India’s Economy
As you can probably tell, the departure of SuperGroup and other operators will have a substantial effect on the Indian economy. For instance, Indians working for these operators will be losing their jobs. Similarly, local businesses and brands associated with the said operators are also grappling with the effects of the exit.
The iGaming operators have been sponsoring various aspects of India’s economy, especially in the sports and entertainment arena. Given the reality of the new iGaming tax dawning for many, it remains to be seen how many in the iGaming sector in India will react.
That said, there have already been some sharp responses from industry observers. The most notable one has come from Roland Laner, the CEO of The All India Gaming Federation, who opined that the decision to implement the 28% tax was both irrational and unconstitutional. Mr. Landers goes as far as to suggest that this move has the possibility of wiping out the entire Indian gaming industry and serves only to benefit ‘anti-national illegal offshore platforms.’
While online gambling continues to be one of the fastest-growing industries in India, some worry that the tax burden imposed could supersede the revenue stream generated from iGaming. If these fears bear any weight, then India’s iGaming scene could be under real existential threat.
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