India’s Goods and Services Tax (GST) Council July 12 approved a maximum 28 percent tax on the full face value of wagers in online gaming, casinos and horse racing, the Press Trust of India reported.
Previously, online gaming companies paid a relatively nominal fee. Now they will be levied 28 percent on the entire bet collected. Casino operators will pay a 28 percent tax on the value of chips customers buy, Vivek Johri, chairman of the Board of Indirect Taxes and Customs, told the Press Trust.
The new rate was popular among the Group of Ministers (GoM) of India’s largest states, including ministers from West Bengal, Uttar Pradesh, Goa, Tamil Nadu, Telangana, Gujarat and Maharashtra.
According to Press Trust, top online gaming companies have expressed alarm using the FICCI Gaming Committee to the Central Board of Indirect Taxes & Customs (CBIC).
They said it would be “extremely detrimental to the survival of the online gaming industry as no business operations can survive with such high taxation.”
Saumya Singh Rathore, co-founder of gaming platform WinZO Games, told the Economic Times that a 28 percent tax on companies that are trying to grow through creation of intellectual property and technology would wipe out some of the smaller ones and discourage others from creating homegrown technology and products.
Union Finance Minister Nirmala Sitharaman said the levy was not intended to kill the sector, but added that because of the “moral question” of gambling, that it can’t be taxed at the same rate as vital commodities.
According to the Press Trust, she declared, “We are purely looking at that what is being taxed because it creates value, profit is being made based on the wager people win. Today’s decision looks at what is to be taxed and what not.”
The government is leaving the moral questions of gambling to the Information Technology ministry.
Although many in the industry have called for a platform fee instead of a tax of wagers, Sitharaman said that was impractical since it is difficult if not impossible to track down every player to find the origin of bets. “It is impossible to pierce the veil of opacity,” she said.
Officials and state ministers had previously said that one justification for the high tax rate is to discourage minors from becoming addicted.
The All India Gaming Federation (AIGF), whose members include most operators, called the GST Council decision “unconstitutional, irrational, and egregious.”
AIGF CEO Roland Landers declared, “The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms.”
The Indian stock market’s gaming sector registered the industry’s displeasure with the tax. Some large casino stocks lost more than 20 percent of their value on the day after the announcement.
