Date: 25.06.2024

by Adam Dworak

GST Hike Puts Pressure on India’s iGaming Sector

India’s 53rd Goods and Services Tax (GST) Council meeting, led by Finance Minister Nirmala Sitharaman, has left the iGaming industry facing uncertain times with the continuation of a high tax rate. The council has retained the 28% GST on the full value of bets made on online games, a decision initially implemented in October 2023.

Super Group Ceases Services in Indian Market Due to Tax Changes

No Relief in Sight

Despite ongoing appeals from the iGaming sector, the GST Council provided no indications of a possible reevaluation of the current tax framework. This retention of the 28% rate, up from the previous 18%, has been officially enforced across India, starting with Kerala on January 5. This significant increase has been a point of contention, disrupting the local gambling industry’s operations.

Impact on Major Operators and Tech Giants

The tax increase has already driven major players like NYSE-listed Superbet, parent company of Betway, to exit the Indian market. Others, such as FTSE100 Flutter Entertainment which operates Junglee, are reassessing their strategies in light of these developments.

Even Google has been compelled to revise its Play Store policies regarding real-money games, highlighting the widespread impact of the GST hike.

Regulatory Challenges and Market Responses

The new tax regime has led to an increase in tax evasion notices to online gaming companies, dating back to 2017, causing a surge in complaints to India’s Supreme Court due to the harsh penalties and interest on overdue taxes.

The council’s recent move to waive some penalties and interest for the fiscal years 2017-2020 does not extend to cases involving fraud or financial misstatements, which includes many iGaming firms.

Economic Toll and Industry Outlook

Research by Ernst & Young (EY) and the US-India Strategic Partnership Forum (USISPF) reveals the dire economic impacts of the GST increase. The tax now consumes up to 100% of the revenue for one-third of the companies surveyed, halting investments and forcing many to scale back operations.

This fiscal strain has led to significant job losses in an industry previously poised for explosive growth.