India’s GST Council maintains 28% tax on online gambling and casinos after six-month review

India’s Goods and Services Tax (GST) Council has decided to retain the 28% turnover tax on online gambling, casino operations, and horse race betting. The decision follows a six-month review of the tax hike, which took effect in October 2023. The review was originally promised to assess the impact of the increased tax on the industry.

Speaking at a press briefing, India’s Finance and Corporate Affairs Minister Nirmala Sitharaman revealed that revenue from online gambling had surged by 412% between November 2023 and April 2024, reaching 6,909 crore ($823 million). Revenue from land-based casinos also saw a significant increase, growing by 30% to 1,214 crore ($25.5 million) over the same period.

Despite these figures, Minister Sitharaman refrained from concluding that the industry had fully accepted the higher tax rate. "The council heard the facts and that’s where it was left," she said, referring to the review. "It was more a presentation of the current situation."

The tax hike has been controversial since its introduction, with industry stakeholders warning it could stifle growth. A June 2024 review was postponed, frustrating the online gaming sector, which had been hoping for relief. At the time, Rajat Bose, a partner at Shardul Amarchand Mangaldas & Co Advocates & Solicitors, said the industry was eager for the council to address its concerns.

Economists and analysts have voiced concerns about the impact of the tax. Economist and former Indian government official Dr. Aruna Sharma noted that the high tax burden would likely be passed on to players. A report by EY and the US-India Strategic Partnership Forum also indicated that the tax increase has hindered the flow of foreign direct investment into the Indian gaming sector.

Since the tax was introduced, no new capital has been raised, despite $2.6 billion in foreign investment pouring into the industry between 2019 and 2022.

The GST Council, composed of Minister Sitharaman and representatives from India’s states and union territories, has the authority to make decisions on tax rates, exemptions, and administrative processes. The government has also been working on broader regulations for the online gambling industry, including the creation of self-regulatory bodies to oversee gaming operations under rules introduced in January 2023.