Starting from October 1st, the new 28% tax on the iGaming Industry in India will start to apply and the government has been making moves to ensure that the rollout of this tax goes smoothly, despite unfavourable reactions from the vast majority of the industry leaders in the country.
What Tax Is This?
As we covered back in July when the decision on the new tax was made by the Goods and Services Tax (GST) Council, the new 28% tax will be imposed on online gaming, horse racing and casinos.
In the meantime, the Council further clarified the valuation rules pertaining to the levy, specifying that online gaming, casinos, and horse racing would be subject to taxation based on the entire face value of the wagers placed.
How Will the Tax Affect the iGaming Industry in India?
Over 100 gaming firms and investors have urged the government to reconsider the 28% tax, labelling it an “existential threat” to the industry. In August, the GST Council agreed to entertain a review of the levy six months after implementation but maintained the decision to impose the tax.
According to Finance Minister Nirmala Sitharaman the tax isn’t meant to the industry, but instead close a loophole that comes from making a distinction between games of skill and games of chance, which won’t be the case anymore.
How Did the Tax Affect the iGaming Industry in India So Far?
India’s online gaming sector is presently estimated at approximately $1.5 billion, with some reports indicating it to be one of the country’s rapidly expanding consumer internet sectors. According to different resources, there are more than 1,000 startups in India in the industry, attracting both foreign and domestic investors.
However, since the new tax was announced, we have seen drops in job postings in the industry, from 25% to 60%, both by startups and large companies.
So, it remains to be seen how this new tax will affect the iGaming industry in India, but the results so far aren’t looking good.
