Industry players fear 28% GST on internet gambling will hurt the industry

BENGALURU: After the necessary amendments to federal and state laws are enacted, the decision to apply a 28% tax on the full face value of bets placed on online gambling will go into effect on October 1st, according to Finance Minister Nirmala Sitharaman following the 51st GST Council meeting in New Delhi.

After six months, the GST Council will reevaluate the application of the 28% GST to casinos and online gaming. The FM stated that other states, including Uttar Pradesh, Gujarat, Maharashtra, and Karnataka, wanted the decision made at the last meeting to be carried out. According to the FM, Goa and Sikkim wanted to collect the tax on gross gaming revenue (GGR) rather than face value, while Delhi had rejected it.

After the meeting, Sitharaman stated that the GST Council, the highest decision-making body of the new indirect tax system, which consists of the Union FM and representatives of the states, had discussed the language of amendments that will be required to enable taxing online gambling. The council, she continued, “recommended that valuation of supply on online gaming & actionable claims in casinos may be done based on the amount paid or payable or payable to or deposited with the supplier by/or on behalf of the player, excluding the amount entered into the games, bets out of winnings of previous games and not on the total value of each bet placed…”

In response to the Council’s decision, the All India Gaming Federation (AIGF) stated that it would “severely impact the online gaming sector” and lead to a situation where the majority of players, including MSMEs, would no longer be able to survive in the face of the increased tax liability of 400%.

Only firmly established and entrenched skill gaming businesses may be able to survive this transformation by utilising their capital reserves to offset the effects of much higher tax obligations. However, even their earnings and market value will decline sharply. “The rampant illegal offshore gambling websites will thrive as efforts to block them have been ineffective up to this point,” warned the AIGF, adding that “companies at their early growth stages, particularly those within the startup and the MSME sector, will be disproportionately impacted.”