Most Online Gambling Companies Do Not Pay Tax in India: Currently, online games’ GST involving gambling or betting is 28%, while the rate on games that don’t involve gambling or betting is 18%. Online gaming platforms also pay a tax rate of 18% on the commission they collect on each game.
International experience in skill gaming indicates that indirect tax is generally charged on the rake fee or gross gaming revenue, the revenue gaming operators earn. The tax is applied on the wager or entry fee if the platform provides a game of chance characterized as gambling or betting.
However, some offshore online gambling companies aren’t registered under the Central Goods and Services Act, 2017 and don’t pay the applicable indirect and direct taxes that need to be paid under the Indian laws, even by companies that don’t have a registered office in India and are located outside the country. The gambling websites’ tax evasion results in a loss of revenue to the exchequer.
This threatens India’s economic stability, and such websites mostly engage in fraud and game manipulation. Multiple complaints have been registered where these sites take deposits from innocent players and refuse to offer them any withdrawal option for their balances or winnings under different pretexts.
Casino Days was launched in 2020 and has become one of the biggest online casinos in India. They don’t engage in tax evasion. However, since they’re located abroad, they don’t pay taxes in India. This applies to all online casinos in India because they aren’t allowed to operate there, meaning these online betting sites can’t set up legal companies or entities within India. Consequently, all online betting websites in India are located abroad and legally registered outside the country, including Cyprus, the UK, or Malta, where the gambling and taxation laws are convenient for the betting companies.
India’s vague gambling laws imply that online gambling companies can operate overseas while still accepting Indian players without paying taxes to the country. While this is a win-win situation for the betting entities as they access a vast market without paying any tax, the Indian players are left paying taxes on the potential winnings they earn.
The Ministry of Information and Broadcasting (I&B) issued television, print, and digital media guidelines to stop advertising online on offshore betting platforms. This is because gambling and betting are illegal in most parts of India, and concerns have been raised about online betting advertisements promoting activities that are primarily prohibited and are a significant socio-economic and financial risk for consumers, mainly the youth and children.
Additionally, online gambling advertisements are misleading and may not seem to be in strict compliance with the Consumer Protection Act 2019, advertisement norms under the Norms of Journalistic Conduct set by the Press Council of India under the Press Council Act, 1978, and the Advertising Code under the Cable Television Networks Regulation Act, 1995. The All India Gambling Federation (AIGF) beseeches the Indian media platforms to embrace a solid mechanism while applying a strict assessment process when onboarding adverts from offshore gambling companies.
According to Elara Capital Limited, the e-commerce vertical brings in 13% of ad spending for traditional media, including print, radio, and TV, where 20% of it would be from online betting platforms. This results in a 2 to 2.5% negative impact on traditional media ad spending. Digital media e-commerce contributes 17% of all the ad spending, of which 30% would be from the online betting platforms, resulting in an almost 5% negative impact on digital ad spending.
This negative is big for broadcasters with sports-led properties, such as IPL and other cricket tournaments, because a more significant portion of their advertising budget is during sports tournaments featured on OTT and TV. The ban on online betting platforms’ advertising comes at a time when overall ad budgets have been restrained recently because of inflation’s negative impact across the board and reduced ad spending by digital companies and startups due to profitability focus.
Will online betting companies ever pay taxes in India?
For online betting companies to pay taxes in India, online betting should be made a regulated activity. This implies regulating the online gambling industry, creating a national gambling regulator, and letting online sites develop companies and apply for betting licenses in India. When this happens, the Indian government can levy taxes on the gambling companies and utilize the tax funds to finance several public programs, including anti-gambling addiction measures and funding of schools, roads, and more.
