India Approves an iGaming Tax: The Government Clears the Way for New Regulations
India is one of the fastest-growing markets for internet gambling, particularly online casino games. According to KPMG research, the Indian online gaming market will be worth $2.8 billion by 2023, with a compound annual growth rate of 27%. However, the business faces a huge problem because the government has imposed a new tax on online gaming platforms that will go into force on October 1, 2023.
India Government Clears Way for New iGaming Tax
The new tax, which the Goods and Services Tax (GST) Council announced in July 2023, would apply a 28% duty on net gains from any online gaming platform, including online casino games.
The online gambling intermediaries, including websites, applications, or platforms, shall deduct the tax at the moment of withdrawal and after the fiscal year. Offshore online gaming firms operating in India would also be subject to the tax, requiring them to register locally and establish a representative to pay tax on consumer funds.
Online gaming industry critics say the new tax is unfair, discriminatory, and harmful to development and innovation. More than 100 gaming businesses and investors, including Tiger Global and Peak XV, have written to the government asking them to review the tax and cut it to a fair amount.
They claim the tax will negatively impact India’s online gambling industry:
- Online casino operators will face a substantial tax on their income, which is already subject to taxes and commissions, reducing their profitability and sustainability.
- Players will avoid online casino games because they would have to pay a hefty tax on their winnings, reducing their returns and incentives.
- It would decrease investment and funding opportunities for existing and new online casino players, hindering development and innovation.
- Online casino companies must comply with tax legislation for numerous Indian states and authorities, making compliance difficult.
- Some players and operators can use alternate channels or platforms to avoid the tax, increasing the risk of illegal and unregulated online casino activity.
However, the government has justified the increased tax to standardize and clarify online gambling taxation in India. The government has also stated that the tax is not meant to harm the sector but rather to remove a loophole and eliminate any distinction between a “game of skill” and a “game of chance,” which has been a sensitive topic in India’s legal and regulatory framework for online gambling. After six months, the government will evaluate the tax and accept business feedback.
How Can India’s Online Casino Industry Prepare for the New Tax?
The Indian online casino business has a difficult and unclear future due to the new tax on online gambling platforms, which will go into force on October 1, 2023. The industry must prepare for the new tax and its consequences and take proactive and strategic efforts to limit risks and maximize possibilities.
Here are some ideas on how the Indian online casino sector should prepare for the impending tax:
Engage with the government and stakeholders:
The online casino industry should communicate with the government and other stakeholders, such as regulators, policymakers, industry associations, and the media, to express its concerns and seek clarity and guidance on the new tax and its rules and regulations. The industry should also evaluate the latest tax and ask the government to amend it based on its contributions and interests.
Educate and enlighten players and investors:
The online casino sector should educate and inform them about the new tax and its impact on online casino games and activities. The industry should also convey and explain the benefits of playing online casino games and the value and quality of online casino platforms and services. The industry should also provide incentives and prizes to players and investors to maintain and recruit them and boost their loyalty and satisfaction.
Improve and innovate online casino platforms and services:
To boost efficiency, performance, and profitability, the sector should innovate and optimize its systems and services. The sector should research and implement emerging technologies like artificial intelligence, blockchain, and cloud computing to improve online casino security, transparency, and convenience. The sector should diversify and extend its online casino offers and markets to meet players’ and investors’ interests and demands.
The Takeaway
The new tax on online gambling platforms, which will affect the Indian online casino business, is a significant and contentious move that will have far-reaching and long-term consequences for the industry and its stakeholders. The sector must adapt and evolve to the new tax’s difficulties and prospects. The Indian online casino business must work with the government and other stakeholders to establish a sustainable and favorable climate for all parties.
