Indian Government Clears Way for New Tax on Online Gambling
It is worth paying tribute to the fact that such a sensational boom regarding the introduction of a new tax is already right around the corner. A new 28% tax on the iGaming industry in India comes into effect from October 1st. Since July, when the Goods and Services Tax (GST) Council began discussing the introduction of a rate of 28%, there has been an untold flurry of discussions and indignation from all quarters. Many experts understand where this could lead the industry and how it could increase unlicensed venues’ ability to enter markets.
It is clear that no one wants to simply derail such a powerful industry, and as previously expected, more than 100 gaming companies and investors, including Tiger Global and Peak XV, voiced their concerns and asked the government to reconsider its decision. calling the 28% tax an “existential threat” to the industry.
Another interesting fact is that in August the GST Council seemed to make concessions in the form of agreeing to revise the tax, but 6 months after it came into force. Perhaps the government wants to see how events will develop within the framework of the accepted conditions, so that after 6 months they can come to a new formation or leave everything as it is.
Parliament also clarified the tax rules, indicating that Internet gambling is subject to tax on all amounts wagered on online games, casinos and horse racing.
Allegedly, the Ministry of Finance is afraid of the difference between a “game of skill” and a “game of chance”, and so that there is no difference in this, as Finance Minister Nirmala Sitharaman says, the idea of introducing a tax serves as a safety instrument in the industry to close the loophole and do not allow any difference between these concepts.
According to Casino.org, the Indian internet gambling industry is currently valued at around US$1.5bn and online gambling is one of the fastest growing internet businesses that is spreading massively in the country.
All offshore companies that offer online services on the Internet must register their business in the country, as the Indian government has obliged everyone to do. Alternatively, these companies may use an agent to pay tax on customer funds.
It is an obvious fact that the GST Council will start blocking all foreign online gambling companies in India. So here is most likely an exit to follow the current conditions and hope for some new introductions in 6 months.
According to data from Rajat Mohan, partner at AMRG & Associates, offshore online gaming companies will not benefit from any tax arbitrage and will be considered on an equal footing with their domestic peers.
It is difficult to accept the fact that this tax will lead to a lot of layoffs. For example, the Indian gaming application Mobile Premier League, which last month announced that it plans to lay off 350 employees, with reference to somehow surviving the innovation with a 28% tax.
It is also noteworthy that Casino.org reported in April that gaming operators looking to develop in India have been warned about violating the country’s tax laws. That effort will also focus on anti-money laundering, the government said.
More hiring pauses in anticipation of the new tax law coming into effect
The gambling industry is developing at a tremendous pace, attracting more and more players and investors to its projects. This is facilitated by numerous advertisements. According to Tracxn, there are already over 1,000 gaming startups in India that are working to attract both domestic and foreign investors.
Following the announcement of the new tax, recruitment agencies and job portals, both large and start-ups, reported that the number of job advertisements fell from 25% to 60%. This may be an indication that companies are considering new strategies.
Notwithstanding this flurry of comments, the government has stated that the introduction of the tax is valid and that, until now, companies have not practically paid the tax levy that they have levied on the offering of real-money games.