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Indian Online Casino’s in 2023: the Govt Gives with One Hand and Takes Away with the Other

Online casino India is one of the most prominent and rapidly rising sectors of the Indian digital economy, boasting a size of $2 billion and growing with astounding rates exceeding 28 percent annually. PM Narendra Modi’s government is showing its support by real actions and at the same time is voicing its high expectations for the sector to contribute greatly to the country’s prosperity and expand on the global market with “Made in India” games.

With a user base exceeding 400 million gamers, the sector consisting of more than 800 companies, already including among their ranks 3 unicorns, is still at its nascent stage of development and can use the incoming support from the government to realise its full potential.

Following the introduction of the last Union Budget, the AVGC (Animation, Visual Effects, Gaming and Comics) Task Force was established with the aim to promote the online gaming and related sectors.

Subsequently, the government set up an inter-ministerial panel mandated to study global best practices, consult experts and stakeholders, and draw up recommendations for implementing enabling policies focused on ease of doing business and player protection.

Looking at these facts, having great expectations for the Online gaming industry’s continued economic boost, attraction of massive fresh investments far exceeding the $1.6 billion in FDI roped in within the last 20 months, and substantial creation of high-level jobs, seem more than justified.

Govt’s Tax Arm Seems Eager to Deliver a Devastating Blow

Expectations by the tax authorities to collect increasingly enormous contributions from such a rapidly growing industry would also have been well grounded if their sheer scale had not, quite unfortunately, lost touch with reality.

It seems the tax arm of the government has either mistaken the number of zeros to the amounts it intends to collect in tax contributions from the otherwise burgeoning online gaming industry, or has by some inexplicable by normal logic reason decided to deliver a devastating blow to the sector and relieve it from its pains for good.

The Group of Ministers (GoM) tasked with recommending updates to GST policy over casinos, horse races and online gaming suggested equalising skill gaming levy to the one over gambling, i.e. clubbing together an online fantasy sports league played on a skill gaming platform to an Online casino India game played in a casino under the 28 percent GST rate slab applicable to the full face value of tickets or contest entry fees.

Currently, skill gaming platforms are paying 18 percent GST over their gross gaming revenue (GGR) or trade margin, and prize pools are subject only to players’ income tax, but not GST.

This is consistent with global practice and with the provisions of the Union Constitution, the existing GST legislation, and six decades of established court practice, and the business model of online skill gaming companies is built around this principle.

Charging GST over a game of skill with the same rate and valuation rules normally applicable to a Online casino game would mean a hike of the effective tax burden of 1,100 percent and cannot be expected to be sustainable. Such a development would either take the companies out of the business, or force them to move operations abroad to the black market.

As a whole, the online gaming sector in India is suffering from a profound lack of proper regulations and is forced to exist in a legal landscape dotted with gaps, grey areas, ambiguity and contradictions.

This confusion results in constant rapid shifts of policy suggestions and implementations, and regulatory and taxation uncertainty, which at times threatens not only the further growth, but the actual survival of the country’s gaming industry.

In view of the sector’s enormous potential and the high expectations vested in it, the central government bears a responsibility to develop a sensible and robust regulatory framework capable of ensuring a sustainable business climate, as well as a safe gaming environment.