India keeps 28% gambling turnover tax as revenues surge

India’s GST Council Upholds 28% Turnover Tax on Gambling as Revenues Surge

Attention-grabbing, record-breaking, and controversial: India’s GST Council has upheld the much-debated 28% turnover tax on online gambling, casino, and horse race betting. Despite concerns from industry stakeholders, the decision reflects the government’s focus on maintaining high revenue collections. As India’s gambling sector grapples with the impact of this heavy taxation, the question remains: Can the industry thrive under such financial pressure?

Record Tax Revenues Bolster Government’s Decision

India’s Goods and Services Tax (GST) Council, led by Finance Minister Nirmala Sitharaman, announced today that the 28% gambling turnover tax will remain in place. This decision follows a six-month review period of the tax hike, implemented in October 2023, which has significantly boosted government revenues.

Minister Sitharaman highlighted that revenue from online gambling surged by an astounding 412% between November 2023 and April 2024, reaching ₹6,909 crore ($823 million). Similarly, land-based casino revenue saw a 30% increase during the same period, totaling ₹1,214 crore ($25.5 million).

When questioned on whether the spike in revenues indicated the sector’s acceptance of the tax hike, Sitharaman stated, “The council heard the facts and that’s where it was left. It was more a presentation of the current situation.” Her remarks suggest that, for now, the GST Council sees no reason to alter the tax policy that has significantly bolstered its coffers.

Industry Voices Concern Over Prolonged Heavy Taxation

While the government’s focus on tax revenue gains is clear, stakeholders within the gambling industry have expressed growing frustration. Many hoped the six-month review would result in a reduction of the tax rate, which they argue stifles growth and investment. The sector was left disappointed when the review was postponed during the GST’s June session, exacerbating the sense of unease among operators.

Rajat Bose, a partner at Shardul Amarchand Mangaldas & Co Advocates & Solicitors, commented, “The online gaming industry was eagerly looking forward to the GST council meeting in the hope that their concerns would be addressed.” Despite these hopes, the GST Council has so far shown little inclination to ease the tax burden.

Economist and former government official Dr. Aruna Sharma also warned that “heavy taxation is likely to be passed on to the players,” leading to reduced participation and profitability within the sector. Industry reports further support these concerns. A study by EY and the US-India Strategic Partnership Forum revealed that while the Indian gaming sector had attracted $2.6 billion in foreign direct investment since 2019, no new capital has been raised since the introduction of the new tax regime.

Regulatory Challenges and the Path Forward

The GST Council, comprising Sitharaman and representatives from all Indian states and union territories, holds the authority to determine tax rates, exemptions, and administrative rules. The decision to uphold the 28% turnover tax underscores the council’s commitment to maintaining stringent controls on gambling activities.

In a parallel effort to regulate the industry, the Indian government introduced new rules for online gambling in January 2023. These rules included the establishment of independent “self-regulatory bodies” aimed at creating a framework for ethical and responsible gaming. However, the heavy tax rate remains a contentious issue, overshadowing other regulatory developments.

While the surge in tax revenues provides a financial boon for the Indian government, the sustained 28% turnover tax on gambling poses significant challenges for the industry’s growth. Stakeholders argue that the high tax burden could hinder investment, innovation, and consumer participation, potentially driving players to unregulated platforms. As India continues to refine its approach to regulating and taxing gambling, balancing revenue generation with sustainable industry growth will be crucial for the long-term health of the sector.

The GST Council’s decision to maintain the current tax rate signals a cautious yet firm approach, but whether this strategy will benefit the industry in the long run remains to be seen.