Focus on Asia: India — A tale of taxes

November 2, 2023 8:00 AM

Focus on Asia: India — A tale of taxes

Photo: Shutterstock
  • Ben Blaschke — Managing Editor, IAG
November 2, 2023 8:00 AM
  • Ben Blaschke — Managing Editor, IAG

Boasting the largest population on the planet as of April 2023, India is arguably the single most exciting gaming jurisdiction anywhere in the world – supported by a rapidly rising middle class with an increasingly voracious appetite for mobile technology.

But right now, India’s gaming industry finds itself at the crossroads, hamstrung by a nation’s disparate views on gambling across its 28 states and eight union territories, and by what appears to be a calamitous understanding by certain government entities of how the industry works.

This has become increasingly evident in relation to tax, with recent efforts to implement a standardized system serving only to threaten the industry’s very existence. In June, the nation’s GST Council announced it would implement a uniform 28% tax on all online money gaming, casinos and horse racing, but that rather than taxing revenues, the new tax would instead apply to the face value of the chips purchased in casinos, to the full value of bets placed with bookmakers on horse racing and to the full value of bets placed for online gambling. That’s right, operators are, as of 1 October 2023, being taxed 28% on turnover.

Perhaps even more absurd were revelations by India’s only listed gaming company, Delta Corp, in early October that it had received a series of demands from national and regional tax authorities for the payment of alleged back taxes totaling around US$2.8 billion – more than six times the company’s entire market cap of US$420 million at time of publication! Just as the GST Council’s 28% tax initiative, Delta Corp – which operates land-based and offshore casinos in Goa and Sikkim, plus online skill games via its Adda52 portal – claims that such calculations are also based on turnover rather than revenue and has promised to battle the tax demands in court.

What must be of great concern to all impacted operators is why these many government bodies are pushing for a form of taxation that essentially taxes the industry more than it earns? Unfortunately, there appear to be only two answers to that question, and both are equally scary: either these bodies are so naïve as to simply not understand that taxing turnover rather than revenue is not mathematically feasible, or, they know exactly what the difference is and are using taxation as a means of achieving their own (anti-gambling?) agendas.

Either way, it seems the legal gambling industry in India has a gargantuan fight on its hands for the foreseeable future.

The great irony, of course, is that India is home to one of, if not the, largest illegal gambling market in the world, much of it centered around the national sport of cricket. According to various reports, around 340 million Indians bet on cricket– all of them illegally – wagering at least US$100 billion annually, but likely much more.

Despite this, there has been very little meaningful discussion around legalizing and regulating sports betting in the country, leaving a huge black hole in lost tax revenues which are instead being leaked offshore, or to one of the many illegal bookies doing the rounds locally (bookies with a long track record of match-fixing).

Looks like yet another case of twisted priorities and missed opportunities.