Taxing online gambling companies is set to generate a hefty sum for the government. In a statement to the news agency Reuters, Revenue Secretary Sanjay Malhotra said that the government is expected to collect up to Rs 14,000 crore ($1.7 billion) in goods and services tax (GST) by next year from the online gambling industry. This plan comes after the government implemented a 28% tax on online betting in October 2023.Passing of the new law has caused ripples in the nascent $1.5 billion industry in the country which is backed by global investors. The government defended the move, citing concerns about addiction and its potential to become a good revenue stream.

How the GST is affecting players

Due to the GST imposed on online gaming and casinos, players have to pay tax on full value of their initial purchase of the in-game currency. To simplify, players need to pay Rs 28 of the first Rs 100 spent in the game (which is 28%).
The entire tax is being collected at entry level only. The government doesn’t impose a tax on winnings used further in the game. However, the tax that will be charged won’t be returned in case the players receive a cash refund.

How the GST will help the government

Malhotra confirmed that this strategy is paying off. He noted that the amount generated from the tax imposed on the online gaming industry has already exceeded initial projections and has crossed Rs 3,500 crore in the October-December quarter.

He expects this momentum to continue and the government is expected to collect nearly Rs 75 billion in taxes by the end of this fiscal year (ending March 31, 2024). This will also be a significant jump from the previous year’s Rs 16 billion collection.

However, Malhotra cautioned that “the industry has stabilised, but it is early to make conclusive remarks.” He also mentioned that a review of the framework to tax online gambling companies will be conducted by April. But that doesn’t mean tax rates would be changed, he added.
The government’s overall GST collections have averaged to Rs 1.7 trillion per month, Malhotra noted. “We are expecting an average monthly collection of Rs 1.80 trillion to 1.85 trillion from next fiscal year,” he added.
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