It's bad news for online gambling companies, as India's Goods and Services Tax Council has decided to keep their 28% tax on online gambling, after a six-month probation period. The review was conducted after the initial October to March trial run of the taxes, with the tax panel agreeing that the revenues generated were significant enough to keep the scheme running.
This decision impacts the gaming industry's revenue, as operators face hefty tax burdens. Despite pleas from stakeholders to lower the rate, the government emphasised the need for uniform taxation across gambling platforms, including online gambling and brick-and-mortar casinos. For players, this decision affects India no deposit casinos and bonuses too, which may become less attractive due to higher costs passed on to users. While some hoped for a more lenient tax regime to boost the industry, the 28% rate remains, aiming to regulate the sector and curb excessive gambling.
Taxes Grow at a Large Rate
After a meeting of the GST Council on Monday, 9th of September, Finance Minister Nirmala Sitharaman reported to the press that they had experienced a surge in revenues from online gambling during the initial period of taxation. The Minister reported that they had seen revenues grow to 412% over the previous period, bringing in a tidy Rs 6,909 cr.
The mandated taxation rate applies to both domestic and offshore gambling operators, although this is much easier to enforce when it comes to onshore companies. In updates from the GST Council, there have been 118 notices given to domestic operators after they failed to turn over taxes at the high rate.
Companies Trying to Evade The Tax System
During the talks about taxation, it was also noted that offshore operators were going through loopholes such as using multiple URLs, engaging in blockchain and cryptocurrency casinos, and even setting up fantasy sports leagues to circumvent the existing tax rules. There was also commiseration about the lack of global legislation to help with regulating the industry, which would be extremely hard to define and enforce.
There were also arguments presented by operators that were trying to evade the taxation system; namely that games themselves were based on skill. In most instances, these claims were proven to be unjustifiable.
The Council found that it was already difficult to ensure that companies were compliant with the GST tax rate, with a significant amount of time and resources placed into chasing up operators and issuing notices.
For Those Who Won't Comply
For offshore entities who have been non-compliant with their GST obligations under the law - at this point, 658 operators were identified - actions have been taken. At the moment, the first line of defence is URL blocking, ensuring that the operators cannot be reached via the URL. However, there are workarounds here, as players can use a VPN or the operator can simply clone the website to a new URL and continue operations.
Many of these online casinos operate out of places such as Curacao and Cyprus, tax havens for online gambling companies, and have not been responding to calls from the Indian government. Some more decentralized operators have proved hard to track down, with a series of company structures that prove more elusive.
Operators taking sneakier tactics, once identified, change their website and branding without changing their underlying platform structure, which can make it difficult to identify whether an operator has already been stung in the past.
The State of The Indian Gambling Industry
India's gambling industry will continue to grow, there is no two ways about it. Even with the new, high GST tax rate for companies, online gambling is growing around the world. Thanks to new markets coming online, such as the US, there is more awareness of online gambling in general. And as companies see the profits to be made in the industry, there is more reason to go after consumers in this growing market.
Indians already represent the largest online gaming audience in the world, so it seems no stretch that they would also enjoy gaming for money, such as you can do at online casinos. Thanks to rising smartphone usage across the country, now everyone can access online gambling apps and websites from the palm of their hand. While, once upon a time, gambling was limited to in-person play, now players can make a play at any time from anywhere.
While the new tax continuing will likely be annoying to operators, they will have to look elsewhere to cut costs, saving on items like customer service, server locations, and payment providers. There will be much penny-pinching going on, but clever operators will continue to flourish, even under the new taxation system, if they manage to implement the right practices to keep up their profits under pressure.
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