The GST (Goods and Service Tax) officially came into force in India on October 1, 2023. It’s a 28% GST applied to all real money gambling activities and includes online sports betting sites, online casinos, and other similar iGaming sites.
At the time it was introduced, many said that it would mark the end of the iGaming industry in India because it would force players to stop gambling and force operators to exit the Indian market altogether.
Here is a closer look at the impact the 28% GST regime on gambling activities imposed by the Indian government has had since it was enforced late last year.
What exactly is the 28% GST on gambling activities?
Last year, the Indian government imposed a new 28% Goods and Service tax regime on all real money gambling activities (e.g., gambling that takes place on a range of online betting sites like thetopbookies.com, also known as iGaming sites). Under the new ruling, the operators of these websites must collect the tax.
It was first announced in August 2023 by the GST Council in India that all real money wagers placed on casino games, sports bets, horse racing, and lotteries would levy a 28% Goods and Service Tax at full value.
Since coming into effect, it has seen online gambling website operators paying a 1,000% markup on GST payments, which many have said is simply unviable and has marked the death knell for the industry.
Many market-leading operators of globally renowned iGaming sites have already pulled out of India and are unlikely to return any time soon. Only a significant about-face from the policymakers will encourage operators to return to India and get the gambling industry back to its former strengths.
The newly imposed tax regime is said to be part of the Indian government’s much broader effort to come up with a better licensing and regulatory framework at both state and central government levels.
The Integrated Goods and Services Tax (Amendment) Bill and the Central Goods and Services Tax (Amendment) Bill were both approved by the central government and the GST Council.
A provision was initially set out in the 2017 Schedule III of the GST Act, and the goal was to offer more transparency in the taxation of supplies in the gambling industry relating to casinos, horse racing, and all online gambling activities.
How has it affected the players?
Before the new legislation was enforced, only an 18% GST was applicable on top of the platform fee charged for games of skill. In India today, there is no differentiation between games of chance and skill, and now a 28% GST is imposed.
Let’s just say that a person living in India plays an online slot machine in the real money mode. Under the new tax regime, if they spend INR 100 on their favourite online slot, a GST of INR 28 will be levied on that stake.
Therefore, if the fee charged on the platform was 20% of the total stake (in this case, INR 20), the GST would have been just INR 3.6% (or 18% of INR 20). A 30% tax, called Tax Deducted at Source (TDS), is also now levied and deducted from all winnings of every player.
Thanks to the latest tax hike, it works out to an incredible 1,000% increase, dramatically increasing the average cost to gamble at legally permitted iGaming sites controlled by some of the world’s most trusted companies. It’s unlikely that anyone will consider that a viable, long-term change to the business model, leaving a lot of players high and dry.
More people than ever in India have switched from playing at these sites to playing at what are known as offshore casinos and sports betting sites, which do not fall under Indian jurisdiction. Players often use proxy servers of VPNs to sidestep restrictions and gain access to these sites.
Many of today’s best offshore iGaming sites have been carefully handpicked and expertly reviewed on the globally renowned TheTopBookies iGaming review site. When playing at sites like these, the players don’t have to pay such steep taxes on their winnings. It’s no secret why this is a far more attractive prospect for players who have experience in this arena.
The move was met with fierce criticism from operators and players who are still in shock at the decision to impose such a huge tax hike. The future of the iGaming industry is now uncertain, and for the time being, many people will continue to play at foreign-controlled sites that operate outside of Indian law. It’s unlikely anyone knows for certain exactly what will happen, and if – let alone when – the industry will get back on its feet.
Final thoughts
The Indian government’s initial anticipation of growth within the iGaming sector now faces substantial skepticism from numerous experts who foresee potential revenue loss due to the implications of the recent ruling. This ruling, widely viewed as having the potential for detrimental and enduring consequences on the industry, has raised concerns about the stability and viability of the iGaming market in India.
Nevertheless, the implementation of the new 28% GST regime introduces a potential avenue for positive change within the sector. This shift in taxation policy may serve as a catalyst for revisiting and refining the legal framework, regulatory mechanisms, and licensing standards governing iGaming activities in the country.
While the future trajectory of the iGaming industry in India remains uncertain, the evolving regulatory landscape offers hope for potential improvements. It is a matter of observing developments over the coming years to discern whether these changes will ultimately benefit the industry or exacerbate its challenges. Thus, the forthcoming period presents an opportunity for stakeholders to monitor the impact of these regulatory shifts and assess their implications on the overall landscape of iGaming in India.
