GST On Online Gambling: All You Need To Know About New Tax Regulations

Akil Khan
by Akil Khan
November 29, 2023

Taxation in India takes a flip anytime when the Finance Minister reads the budget. There is always something for the economic contribution. The entertainment sector, Arcades, Gaming, and Gambling always attract major tax brackets when the budget is announced.

October 1, 2023, the date changed how the government levies taxation on the online gambling industry. 28% tax is now charged uniformly in online gambling and gaming, including casinos, horse racing, and money gaming. However, a statement came from the Finance Minister about reviewing taxes after 6 months. Online gambling operators think they must juggle the present business model if taxes remain the same.

How Does Present Taxation Affect The Casino Operators?

We all are aware that the online gambling platforms running in India are licensed and regulated by the top-notch authorities, which are non-resident. Malta Gambling Authority, UKGC, Gibraltar Commission, Curacao Gambling Authority, and Alderney Gambling Commission.

From October 1, 2023, the casinos registered under these authorities belonging to foreign nationals or non-resident Indians must register their services in India. The key change brought forward is that these non-resident casino operators must declare their PAN here, notify through registration forms about their operations, and adhere to the valuation norms. These all have become effective after levying 28% GST on the casinos.

However, the SGST or State Goods and Services Tax laws need to be amended in a few states of India. The notifications have already been declared for the non-resident Indians and non-resident operators to declare the financial statements while deducting tax at source. These non-resident operators come under the IGST law, which empowers Indian tax officials to implement uniform laws that the Indian government has decided.

The present tax effect has come forth only at the Central level, but the online gambling and gaming industries are also waiting for State GST amendments. The decision is already been passed by Houses and taken by the Central Government, but they are waiting for States and UTs to regulate their casino and gaming norms. It will keep away any form of legal issues.

On the other hand, the All India Gaming Federation has already submitted its plea to Revenue Secretary Mr. Sanjay Malhotra to reconsider the levying of taxation on casinos and horse racing.

On the levying of SGST, the reference of the case of Kerala High Court was given where the plaintiff and arguer were Baiju v/s State Tax Officer.

The legal perspective on State Goods and Service Tax stands unilateral under Parliament and State Legislature. The State and Center can exercise their powers equally under Article 246A. They can even exercise their powers simultaneously, as the Parliament and State Legislatures do not have any exclusive powers.

How Does Present Taxation Affect The Casino Operators?

Timeline Of GST Decision Taken By Indian Government

As Indians pay taxes on goods and services, it is also applicable to online gambling. The casino sectors, including lotteries and horse racing, contribute significantly to the Indian economy through taxes.

However, GST taxation and tax amendments came into force when the 50th GST Council Meeting decided on July 11, 2023. The decision was taken for online casinos, horse racing, and the online gaming industry. The council applied a uniform tax of 28% to end the debate of the “game of skill and chance.” The casino authority must tax the winnings and declare their PAN to the government.

According to this GST law, all the initial purchases of casino chips or bets will come under flat 28% taxation. No other tax will be levied after that. After this discussion, the 2nd meeting of the 51st GST Council took place on August 2, 2023. This meeting levied the current taxation system, keeping 6 months of review and recommendation in the loop.

Under this GST law, the online gambling has to pay taxes in the following manner:

  • 28% GST will apply to the online gambling sector that is operational in India. Examples included are Dream 11 and other Fantasy Sports Games. This uniform taxation system also includes the ‘games of chance’ such as horse racing, sports betting, etc., that attracted the higher GST under Rule 31A of CGST Rules, 2018.

  • On online lotteries, a uniform tax of 28% will be collected.

  • Along with the game of chance, casino gambling will attract 28% of GST, as scheduled in the 50th and 51st GST Council Meetings.

State GST Taxes to Impose On Casino Gambling

From October 1, 2023, Indian casino gambling witnessed the new taxation laws. The online casinos have to pay 28% to the government in the form of GST. However, certain states are still in disagreement and against this GST.

Delhi, Goa, and Sikkim are expressing disagreement, and the Financial Ministry may proceed with further consultations after six months. Apart from that, Tamil Nadu’s finance minister, Thangam Thennarasu, has asked Finance Minister Sitharaman to watch out for the ban imposed on online gambling in Tamil Nadu.

This ban was imposed under the Tamil Nadu Prohibition of Online Gambling Act, 2022. Moreover, the state was also against the recent notification where the Union Government stated that GST must come under the Prevention of Money Laundering Act of 2002. The state is of the view that it is against taxpayers’ interests. Tamil Nadu also opposes the move because it will affect the small dealers.

Well, Delhi sought the Ministry to review their GST decision. However, Goa and Sikkim, who run casino businesses, want to impose taxes on their gross gaming revenue. On the other hand, Tamil Nadu has stated that they have banned online gaming, so GST would not be paid by the state.

All About GST Rates Applicable in India in 50th Council Meeting

The 48th and 49th Council Meetings held in July 2022 levied maximum taxation on smoking products. However, the 50th Council Meeting levied the maximum GST of 28% on online gaming, casino games, and horse racing. The taxes needed to be paid by the dealers. Players need not pay anymore When they have paid for the chips.

Although a few states disagree, such as Sikkim, Goa, and Delhi, in 2023, after the passing of GST taxation, the state of Goa also made some amendments to its GST taxation on casinos. The state passed the Goa Goods and Services Tax (Amendment) law, 2023, which brings online gaming under the Goa Goods and Services Tax Act. Online gaming will include the money or the virtual assets spent on the casino, horse racing, or online gaming.

Apart from this, Finance Minister Smt. Sitharaman cleared that the government will collect GST on online money gaming. This new amendment will levy a flat tax rate on the game of chance and skill. A specific provision of IGST will cover all the offshore operators providing both these types of games. Moreover, the amendment also blocks any information generated, transmitted, or received, and even hosted in the computer source for the public generated for the online money games supplier.

The Minister also stated that if the offshore companies fail to comply with the present GST laws and the amendments regarding the working of their website, then the IT Act will block all these casino sites. If there is any payment made through the virtual assets, then they will fall under the norms of GST, too. However, the controversies remain as some 15 states still have to pass the GST taxation law.

Will the Indian Taxation System Provide some Relaxation to Casinos?

The non-resident casinos operating in India know that whether it’s a game of chance or skill, they will collect a uniform taxation of 28%. However, the AIGF has appealed to the Revenue Secretary to provide some relaxation, as casinos contribute a major chunk towards the Indian economy.

It means the first INR 100 spent by the players will attract a flat tax of INR 28 on their overall casino gambling. Moreover, to curb the addiction to gambling, now the players are asked to pay 30% if they win more than INR 10,000 in gambling. The decision is not welcomed by the online gambling industry, which shared that this will lead to manipulative means to earn money. It will lead to the concealing of bigger wins, and black market operations will come into effect.

The Gaming Federations and CEO of many Gaming Industries have raised their voice against this current GST tax. They believe it will lead to ‘anti-national illegal platforms’ to make their way inside the country. This new tax framework is set to burden the casinos with a 350% increase that may lead to the shutting down of operations. Many small states have appealed to levy taxes on gross income instead of the face value casino players will pay.

Will the Indian Taxation System Provide some Relaxation to Casinos?

Final Thoughts

However, the review after six months of applying this uniform GST of 28% may provide some relief to the online gambling industry. CEOs and other members of gambling industries are pushing their stand in front of the Finance Ministry. However, in the best of casino players, it is advised that they must refer to the top-notch gambling platforms that experts review. Happy Betting!

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