India Not Likely to Back Off Plan for 28% Tax on Gambling

India’s Goods and Service Tax (GST) Council may be close to introducing a 28% tax rate on the country’s entire gambling industry. While there was hope that cooler heads may prevail, this now doesn’t appear to be the case.

India Parliament House
India Parliament House
India’s Parliament House. The government is considering a proposal to introduce a flat 28% tax on casino purchases. (Image: PTC News)

The GST Council will push forward with the rate once a panel of parliamentary ministers signs off on the measure. That panel specifically discusses goods and services taxes, and is going to determine how to apply the rate.

At the heart of the ministers’ discussion is what will qualify for the tax. There’s one side that it wants to charge the full amount on all purchases a gambler makes at a casino, including food, drinks and more. The other side wants it to apply just to gambling. The ministers will present their results by July 15.

Out of Control Taxation

Under the current tax structure, casinos, horseracing tracks and online games (provided there is no gambling) pay a tax rate of 18%. The online betting and gambling segments pay 28%.

However, ministers decided that charging 28% across the board was a logical conclusion. So last week, the GST Council deferred the proposal, giving the political figures time to figure out their next move.

The tax would apply to the amount of chips a gambler purchases. However, because they can also use those chips to purchase food and beverages, the panel says that’s enough for those purchases to qualify under the gambling umbrella.

Currently, most restaurants charge 18% GST, while a small handful, based on their menu, charge 5%. However, complicating the process for the restaurants and the new casino tax rate is the input tax credit (ITC). Some restaurants receive the credit, but only if they charge the 18% rate.  

Mauvin Godinho, a minister from Goa and a member of the panel, raised concerns in a recent meeting of the panel. As a result, the ministers now have to regroup and re-evaluate the next step.

The proposal would see the inclusion of the GST on the purchase of the chips. Therefore, no other tax is necessary. However, Godinho doesn’t like that idea. He wants the tax applied only to gambling, not to all casino purchases.

No Relief for Online Gambling

Online gambling faces a similar battle. Horseracing tracks and organizers have stepped into the online sphere, but argue that the 28% is going to kill their business. They assert that they have a long-standing position as a not-for-profit organization that already delivers millions of dollars in revenue. To introduce the rate would be a death blow.

Online gambling, which still doesn’t have a clear path in India, wants to see a different setup altogether. It first wants there to be a distinction between games of skill and games of chance. Then, only games of chance would receive the tax rate.

One issue with that is that there is no consensus about what qualifies as a game of chance or skill. A number of Indian politicians have allegedly conducted studies that resulted in the belief that poker is nothing more than a game of chance. However, those same politicians support rummy as a game of skill.

Adding to the complexity are games of skill that involve the exchange of money. These could fall into the gambling segment because of the money, but are still games of skill.

Until India gets a handle on its online gambling segment and better delineates the difference between games of skill and games of chance, it can’t make any headway. However, this battle has been underway for more than a decade. That’s an indication of how difficult it is for lawmakers in the country to figure out the proper course of action.

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