New Gambling Tax in India Set to Rake in $1.7 Billion

India is stirring the pot with their latest regulatory changes in terms of online gambling.  The year started with the local government posting new rules to regulate the online gambling industry. A new gambling rate of 28% Goods and Services Tax (GST) was recently added, leaving many concerned about the industry's future.

 India’s Gambling Regulations

With the new rules for online gambling, self-regulatory bodies have been established to oversee India's popular online gambling market.

Amendments to the Information Technology Rules were introduced to cover online gambling. After this consultation was opened on the 17th of January, Online gaming, as per the rules, is defined as playing games via the Internet where a deposit is made with the expectation of earning winnings.

Instead of a singular government regulator, the amendments propose self-regulatory bodies, which would be made up of online gambling businesses taking responsibility for creating rules for the industry.

These bodies must include a representative from the industry, a representative for players, a consumer education or psychology expert, and a public policy expert chosen by the government.

 140 billion Rupees in Taxes

The recent amendments come as quite a heavy hit as India imposes a 28% tax rate on the total face value of bets. With this, India aims to collect 140 billion rupees ($1.7 billion) from online gambling over the next financial year.

The new tax is applied to the total face value of bets instead of the gross gaming revenue. This means that with every Rs100 customer spends on casino games like Teen Patti or Andar Bahar, the operator is set to pay Rs28 in taxes.

With online gambling, taxes are applied to the full value of all bets, and for land-based casinos, the tax is applied to the face value of the chips purchased at the venue. For horse racing, the tax will be applied to the value of bets placed with bookies.

 Concerns from the Industry

The news of the increased taxes has not been received too warmly. For one, the All India Gaming Federation is concerned about businesses and their survival, leading players to choose to play with unlicensed operators instead.

When the news was first published, the AIGF stated that it could be detrimental to the Indian online casino industry. Increasing liability by 400% to 500% could lead to job loss. With this tax rate, companies will be paying more tax than the revenue they receive.

The main concern is that this could increase the interest in black market betting options, which in turn will challenge and prevent the growth of the Indian Gaming industry.

According to the chief operating officer of IndiaPlays, Aaditya Shah, the 28% tax rate will bring significant challenges and burden company cash flows. The AIGF CEO, Roland Landers, echoed this sentiment, saying it's unconstitutional and irrational.

There will be a review of the framework on iGaming taxes by April, but there is no guarantee that the tax rates will be changed. With the current tax rates, the government has collected 1.7 trillion rupees monthly, and the figure is expected to increase to 1.8 trillion by the next financial year.