India Government Clears Way for New iGaming Tax

Posted on: September 26, 2023, 01:34h. 

Last updated on: September 26, 2023, 02:27h.

Craig Boswell Read More

Expertise: Legislation, Politics, Mid-Atlantic, Southeast, Regulation.

A new 28% tax on India’s iGaming industry is scheduled to start on October 1. The new tax has been met with sharp responses since the Goods and Services Tax (GST) Council announced the move last July.

More than 100 gaming companies and investors, including Tiger Global and Peak XV, have asked the government to reconsider, calling the 28% tax an “existential threat” to the industry.

In August, the GST Council agreed to keep the door open to review the levy six months after its implementation but stuck to the decision to impose the tax.

The Council also clarified valuation rules for the levy, saying that online gaming would be taxed on the full-face value of the placed bets in online gaming, casinos, and horse racing.

Finance Minister Nirmala Sitharaman said the idea isn’t to hurt the industry but to close a loophole and not allow any distinction between a “game of skill” and a “game of chance.”

India’s online gaming industry is currently valued at roughly $1.5 billion, and as reported by Casino.org, online gaming is one of the country’s fastest-growing consumer internet businesses.

Actions Leading Up to October Implementation

The Indian government has mandated offshore online gaming companies operating in the country to register the business locally. They may also appoint a representative to pay tax on customer funds.

Overseas online gaming companies operating in India will be blocked if they fail to do so, according to the GST Council.

Offshore online gaming companies will not enjoy any tax arbitrage and would be treated at par with their domestic counterparts,” said Rajat Mohan, a partner at AMRG & Associates.

Last month, the Indian gaming app Mobile Premier League said it will lay off 350 employees as it takes steps to “survive” the tax imposed by the government.

In April, Casino.org reported on gaming operators targeting India being put on notice for violations of the country’s tax laws. An effort the government says will also target money laundering.

Hiring Pauses Increase as Tax Nears

The online gaming industry has seen rampant growth in recent years. According to Tracxn, there are more than 1,000 gaming startups in India attracting domestic and foreign investors.

Since the announcement of the new tax, staffing firms and job portals are reporting drops in job postings from 25% to 60%, both by large and startup companies. Perhaps a sign that companies are considering new strategies.

Despite the storm of comments, the government says the tax is justified, and companies have so far paid very little tax on the fees they charge for providing real money games.