A unanimous decision by state finance ministers in West Bengal to tax players on winnings from online gaming and horse racing is drawing condemnation from across the iGaming sector.
In what is labelled a shortsighted approach by leading industry voices, the Goods and Services Tax (GST) is increasing from 18% to 28%. There are huge concerns surrounding the welfare of all Indian bettors, many of whom have already turned to illegal operations to cut the costs of taxation on winnings.
West Bengal chief finance minister Chandrima Bhattacharya confirmed the news on Monday: “There was a clear consensus that the highest rate of 28 per cent should be levied on all the three services — casino, racecourse, and online gaming.”
“The officer’s committee will deliberate further and report within ten days on whether the tax would be levied on gross or net value, after which the GoM will meet again and take a call.”
Why Increasing Taxation Will Harm Indian Bettors
The obvious takeaway from this development is simple – what is the point in taking steps to liberalize the gambling industry if the punters are the ones to front up the proceeds taxation benefits to the government?
The entire purpose of gambling regulation is to keep the customer safe – experts are arguing that increasing the levy by a further 10% will have catastrophic consequences for the betting public.
Evidence is already mounting that the sharp rise in the GST leads to more players turning to illegal means with which to place their bets.
How can the industry help soften the blow? There is already talk about some betting sites in India absorbing some of the cost – however, the likelihood of companies taking on the increase is not high.
Another option is to increase the promotional output – ramping up the special offers to help Indian players find value where otherwise there would be none.
Whichever way you look at it, the consumer is the loser in increasing the GST rate – it’s up to authorities to come up with a solution.
Is The Tax Rate Fixed?
For now, yes. However, AMRG & Associates senior partner Rajat Mohan voiced his frustration at the approach from India’s local and national governments. He claimed the industry continues to be subject to harassment and believes the country’s betting industry should return to worldwide tax protocols in the future.
“Hopefully, future tax rules would arrest the multiple interpretations assigned by tax offices around the country and align the taxation to global best practices allowing the sector to flourish,” he argued.
The decision to drastically increase tax may backfire, too. The government is under pressure to meet a target of Rs 1.5 trillion per month – if authorities are hanging their hopes on increasing the GST tax, they may be disappointed. The revenue stream from bettors will be lost to the black market.
The Popularity Of Sports Betting In India
The news may prove a setback for an industry which seems to be making real progress in achieving appropriate sports betting regulation.
A move to liberalize the market has long been touted as a sensible move by onlookers. Indeed, a recent study from ENV Media argues that regulation is the only measure left for the government to ensure maximum income and curb the threat of illegal bookmaking.
The paper, Sports Betting: India’s Favourite Invisible Giant highlights how prevalent illegal sports betting is in India and
“When India’s national cricket team plays a One-Day International match (ODI), illegal betting amounts to around USD 200 million per game.”
“The Federation of Indian Chambers of Commerce & Industry (FICCI) has also provided its estimates quite recently (2019), precisely in the context of the sector’s importance and potential for the national economy if legalized and properly regulated. FICCI’s estimates speak of about half of the above amount – Rs 3 lakh crore (USD 41 billion) – annually changing hands in direct relation to sports events.”
Summing up, the paper argues there is a thirst in India for proper regulation, and the sooner the government recognizes this fact, the better!
“When and if the Central Government of India realizes that there are consistent voter bases that would readily support sports betting and online gaming regulations, we might expect changes in the legal scene, probably rather swift ones as well. As things stand, catering for the conservative share of the population requires a careful approach and no outward liberalization of the betting market.
(Remember to play responsibly)