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GST Council Meeting Leaves Online Gaming Industry in Limbo

Posted on June 25, 2024 | 10:20 am

Industry experts warn that operators in India face a lack of “clarity” over gaming tax after the topic was left out of the country’s latest Goods & Services Tax (GST) council meeting. Indian gaming stakeholders had hoped the council would reconsider a 28% tax for online gambling, casino, and horse race betting, but the council did not address the issue during its session on June 22.

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Unresolved Taxation Concerns

Finance Minister Nirmala Sitharaman confirmed that the controversial gaming tax “wasn’t up for discussion” at the recent meeting. The 28% tax, which is applied to a bet’s full-face value rather than gross gaming revenue, continues to be a major concern for the industry. This turnover-based tax structure has been criticized for its heavy burden on operators, with the costs likely being passed on to players.

“There is no clarity or relief regarding the imposition of tax on the entire transaction value rather than just the income of the platform. The heavy taxation is likely to be passed on to the players,” said Dr. Aruna Sharma, an economist and former Indian government official, in an interview with iGaming Business. She suggested that one possible recourse is for the Supreme Court to impose GST only on the earnings of the platform, not the money involved in real money games.

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Clause for Potential Relief

While the gaming tax issue remains unresolved, a new clause approved at the meeting could offer some respite. Section 11A, if passed by India’s parliament, would allow companies in different sectors to seek relief from retrospective tax demands. This clause enables the waiver of retrospective tax due to ambiguities and includes provisions for waiving penalties and interest on these dues.

“The good news is that the tax rationalization Group of Ministers committee has been reconstituted and may review the tax on online gaming,” added Dr. Sharma. The amendment in Section 11A may help address some of the industry’s concerns by regularizing non-levy or short levy of GST where tax was short paid or not paid due to common trade practices.

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Industry's Broader Concerns

Despite these potential developments, the lack of immediate action on the 28% flat tax rate leaves the gaming industry uncertain. Manish Mishra, partner of JSA Advocates and Solicitors, described the absence of discussions on online gaming as a “major disappointment.” Rajat Bose, partner at Shardul Amarchand Mangaldas & Co Advocates & Solicitors, echoed this sentiment, highlighting the industry’s anticipation for clarity on the tax structure, especially concerning retrospective application.

There is no guarantee that the GST Council will address these concerns. Sitharaman mentioned that the council ran out of time to discuss various items on the agenda and added that those items, including the gaming tax, would be discussed at an upcoming meeting, possibly before the end of August.

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Challenges for Operators

A joint report by Ernst & Young and the US-India Strategic Partnership Forum highlights the challenges facing operators. The report found that the Indian gaming sector has attracted $2.6 billion in foreign direct investment since 2019. However, no capital has been raised since the new tax regime was introduced. The tax rate has had a significant impact, with some companies reporting a complete withdrawal of global marquee investors at the onset of the new GST regime. For example, Super Group, which owns the sportsbook brand Betway and online casino brand Spin, exited the Indian market last October.

The tax rate marked the second major change in India’s online gambling market last year. In January 2023, the Indian government published new rules to regulate online gambling, further complicating the regulatory landscape for operators.

While the GST Council has not announced a specific timeline for the online gaming tax review, the industry will likely continue to press for a more favorable tax regime. In the meantime, the focus of the GST Council remains on streamlining the existing GST framework, providing clarity to businesses, and implementing necessary legal amendments through the upcoming Finance Bill.


GST Council Meeting concludes with no relief for online gaming industry, Business Today, June 22, 2024.

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