New Indian Gambling Tax

New Indian Gambling Tax Rate

The empowered group of ministers is looking to rattle the cages of India’s gambling industry. There have been talks about changing the tax on betting and gambling in India up from the established 18% to 28%. This would constitute a massive jump in gambling taxation, all while a global recession is creeping around the corner.

Prominent Indian gambling entities have expressed their outrage at this new proposal. Gaming companies state that the planned tax hike would severely cripple the industry and leave it in a precarious position given the present events and the uncertainty of the near future.

Details of the New IN Gambling Tax Rate

Many have decried this new tax initiative as ruinous, stating that it would significantly affect the industry. Diving into the detail reveals that it is, in fact, quite heavy-handed. Under the current structure, companies are taxed 18% on their net profit. However, the suggested tax scheme would levy a 28% tax on revenue, instead. Some of the gaming products that it would apply to include:

Casino Gaming
Horse Racing
Sports Betting
Bingo
Poker
Fantasy Sports
Daily Fantasy

This is a major departure from the established norm. If the new income tax on gambling in India is implemented, companies would have to pay several times more than they currently do. It’s known that gambling operators – not just in India, but globally – work on specific margins. Taxing revenue directly would lead to major disturbances throughout the industry and leave many businesses unprofitable.

The ministers’ plans concern all forms of gambling, covering casino gaming, sports betting, horse racing, and others. What’s more, the new tax on betting and gambling in India does not discern between games of chance and games of skill. Both are lumped into the same category, which both players and operators consider unfair.

Online Casinos and iGaming

The proposed 28% tax on gambling would also apply to online gambling sites, as well. This would have a particularly drastic effect on the best online casinos in India and the services they can provide. WinZO, a major Indian gaming platform, stated:

To paint the entire online gaming industry with the same brush as gambling would have serious implications for the development of this sector. Premature over-taxation with the proposed 28% increase would only sink these early-stage companies further into losses, making the industry unviable.

Clearly, there are concerns over the ability of iGaming operators to run their businesses under the proposed income tax on gambling in India. Usually, these companies face global competition, and domestic sites might be pushed out by offshore operators. Furthermore, establishing any new gaming platforms would prove challenging even in the best scenarios.

How It Would Work

One idea about the new gambling income tax is to tax the purchase of chips at a gambling venue rather than the bets themselves. This, however, presents other issues since many Indian gaming venues accept chips as payment for non-gambling services, such as food and drinks. Applying the gambling tax rate to non-gambling services is unjust by any measure.

What’s more, the above-mentioned games of skill are stuck under the same category as gambling games. This includes games where there is an exchange of money, such as poker. However, others, including rummy, are not. Indian gaming venues have rightfully called out this hypocrisy.

Implementation and Future

Following the announcement of the new tax on gambling plan and the outcry against it, the group of ministers initially paused their implementation. However, it’s looking more and more likely that it will be accepted into law anyway. There have been no real revisions to the proposed tax scheme, and authorities have not really considered the dissatisfaction of operators. While we cannot say with certainty what will come to pass, Indian gambling companies need to prepare for the potential shockwave.

The consequences of the new gambling income tax will be significant no matter where you stand on this issue. It’s expected that many operators will fail and file for bankruptcy, while many legal companies will probably leave the Indian market.

Those who manage to remain in business will undoubtedly alter their service to remain profitable. It’s unclear what strategies will be taken to curb the effects of the new tax plan, but none will be in the players’ favour.

There are only a few ways that gambling companies can increase revenue without changing the core product. Those who work on a commission basis will increase their take to offset the tax. Others will decrease the odds in favour of the house to remain afloat. Sportsbooks are expected to reduce the odds across the board, while online casinos will likely include only games with lower payout ratios.

It is still unclear what the Indian government is aiming for with the tax hike. ‘Sin taxes’ are common throughout the world, but they are never this drastic. Regardless, we will watch this development closely and the consequences that come out of it.