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New India 28% Tax on horse racing and online gaming

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The new GST tax regime has been met with disappointment and a notable drop in casino shares.

When it comes to the gambling industry, there's always something new happening, whether it's around regulations or games.

For the Indian gaming market, the latest changes call for a 28% tax on gaming action. At the 50th Council meeting, Union Finance Minister Nirmala Sitharaman announced the new tax, which has been met with some discourse.

New tax rates for the India gaming industry

With the new tax requirement, companies will have to pay a 28% tax on funds collected from players. To date, relatively small taxes have been charged on real money casino game fees.

The new tax rule will significantly impact casino operators as the 28% tax move will also apply to the value of chips bought before playing.

According to Sitharaman, the decision on the new maximum tax levy for online gaming and casinos in India was not a way of killing the industry.

Instead, she stated that there is a moral responsibility to consider and that because of the issues connected to gambling, it cannot be taxed on the same level as essential commodities.

The main objective is adding tax because it creates value and brings profits based on the wagers people win. The Information Technology (IT) Ministry looks into the regulatory aspect of online gambling in India as the GST Council has taken decisions based on tax purposes.

The tax is charged to online companies without considering if it's a skill or chance-based game. According to Sitharaman, it is impractical to meet the industry's demand for the tax levy on platform fees. Seeing as it's an impossible tax for authorities to chase every player and search where all bets have been placed. With this new rule, they cover all the bases.

The government has come to an agreement that betting and online gaming should be charged at the highest rate on full face value.

Drive for responsible gambling

One of the notes addressed in the meeting was that the higher taxes are to discourage young people from overplaying and developing an addiction. This is a step forward in managing a safer gambling environment.

Revenue Secretary Sanjay Malhotra states that the decision to impose the tax is not new. It has been in consideration for a long time, and despite the aggrievance of many, the government won't be backing down. Malhotra states that the government will be up for the fight should anyone wish to challenge the court.

The decision to implement the tax is merely a way of clarifying things and ending the debate.

An amendment to the GST law which defines online gaming, horse racing, and casinos in terms of actionable claims, will likely take place in the upcoming monsoon session of parliament.

A battle of wills

According to the All India Gaming Federation (AIGF), this decision by the GST Council is considered unconstitutional and irrational. The AIGF represents companies like Zupee, Winzo, GamesKraft, and Nazara.

AIGF CEO, Roland Landers, claims that the decision ignores more than 60 years of settled legal jurisprudence and mixes online skill gaming with other gambling activities. Landers believes this decision will wipe out the Indian gaming industry and lead to job losses. He continues by saying that the only ones who will benefit from this tax addition will be the illegal offshore platforms.

Already shares of the Indian casino operator Delta have dipped by a fifth in value. Other online gaming firms also saw a drop in value after implementing the new tax regime.

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