India is proposing to hike tax for online gambling firms to 28 percent of the face value of a bet, bringing the nascent industry in line with casinos and horse racing.
According to Business Times, which cites unnamed sources, the proposed new goods and services tax (GST) is some 10 percent above the current levels.
The federal GST Council, which is headed by Finance Minister Nirmala Sitharaman, has been deliberating the country’s tax rates for the gambling industry for some time. It had been hoped that the council may lighten the tax load.
For casinos, the tax will be levied at the amount paid at the entry point when the customer buys chips and not on every transaction. Horse racing will maintain the current level of taxation of 28 percent on the entire bet amount and not the bet after the deduction of prize money, the report said.
Jay Sayta, an independent gaming lawyer, told AGB that the Group of Ministers (GoM) on online gaming, casinos & race courses had a meeting earlier today (Wednesday) and have arrived at a consensus on their recommendations to the Union Finance Minister and GST Council. A formal report is expected to be submitted to the Union Finance Minister later this week.
“The exact nature & content of the recommendations has not been revealed by the GoM or the government but as per media reports the rate of tax on online gaming has been hiked to 28 percent. The manner of valuation of tax on online gaming, whether it will be on contest entry fee, deposit or platform fee is unclear,” he said.
“Unless the contents of the report or exact recommendation made by the GoM is made clear, it will not be possible to assess the impact of the decision on the sector,” he adds.
The horse racing industry in India has argued that the tax rate makes their products uncompetitive and is fuelling a boom in illegal gambling.
The Turf Authority of India has been lobbying for payment of the tax only on the commission, or service fee, retained by the race club.
The UK India Business Council wrote in a recent report that the high rates of GST are an impediment to growth.
In Goa and Sikkim for example, tax is levied at 28 percent of the face value of a bet and is one of the highest in the world. The report found that a gaming operator’s average revenue was about INR18 million prior to the introduction of the new rates of GST in 2017. That has now fallen to INR 7.2 million.