Can India Learn from New Middle East Stance on iGaming?

The Indian government’s recent decision to impose a 28% levy on the full face value of bets placed on online gaming, casinos and horse racing sparked plenty of debate.

India’s Goods and Services Tax (GST) Council, consisting of federal and state ministers, intends to implement the controversial levy from the start of October.

Numerous industry analysts criticised the move, claiming it would have a detrimental impact on the industry and cause significant job losses.

Sikkim and Goa were among the states who were particularly vocal in their opposition to the tax, arguing it could devastate the casino sector in their jurisdictions. While the Council will reportedly review the decision in six months, its implementation may cause irreparable damage to the industry.

For iGaming operators, the tax will be applied to the full value of all bets placed by players. Given they will be unable to recoup the cost from players, this will make a massive dent in their revenues.

The All India Gaming Federation (AIGF), who oversee online gambling in India, claimed the new tax will be a hammer blow to the industry.

“This decision will be extremely detrimental to the entire Indian gaming industry, with the GST on deposit increasing liability up to 400-500%, and will lead to 100,000 job losses,” the AIGF said.

“At this valuation of taxation, companies will be paying more in taxes than they will be generating in revenue. Gamers will inadvertently, veer towards grey market operators that have been providing services illegally in India. This will stifle competition, hinder innovation and impede the growth potential of the industry.

“The implementation of the Council recommendation will disproportionately impact the large number of MSMEs and start-ups. It will make it challenging for them to survive.”

Former Shark Tank judge Ashneer Grover added his voice to the widespread disapproval about the levy, with a hard-hitting post on social media.

“RIP – real money gaming industry in India,” Grover wrote. “If the government is thinking people will put in Rs 100 to play on Rs 72 pot entry (28 per cent Gross GST); and if they win Rs 54 (after platform fees) – they will pay 30 per cent TDS on that – for which they will get a free swimming pool in their living room come the first monsoon – not happening!”

“It was good fun being part of the fantasy gaming industry – which stands murdered now. $10bn down the drain in this monsoon. Time for start-ups founders to enter politics and be represented – or this is going to be spate industry after industry.”

The implementation of the new gambling levy in India undoubtedly has its roots in ethical questions surrounding the legitimacy of the practice.

The colonial-era Gambling Act does not explicitly address online gambling, which has led to widespread confusion among state-level legislators. Some states have worked to regulate online gambling, while others still prohibit the practice.

Many industry experts argue that India should be taking its lead from developments in other emerging gambling jurisdictions such as the Middle East and North Africa (MENA).

The United Arab Emirates (UAE) is among the nations that has wrestled with the same ethical concerns as India, but is now on track to become a major player in the global gambling industry.

Many Arabic online casinos already accept players located in the UAE and other Middle East nations, opening the door for other operators to jump on the bandwagon. Those countries are using the frameworks established in major gambling jurisdictions such as the United Kingdom to create a formal licensing and regulatory infrastructure within their borders.

Developments in the land-based gambling sector also demonstrate how the Middle East is creating a more welcoming environment for the industry to flourish. The UAE signed off on the creation of a fully-integrated resort – Wynn Al Marjan Island – which will incorporate popular games such as roulette and blackjack.

Wynn’s investment into the resort is supported by a ‘robust gaming regulatory framework based on global best practices’ – a concept which the Indian government is seemingly at odds with.

With the gross gaming revenue (GGR) tax rate expected to be pitched at no higher than 12 percent, Wynn’s move into the UAE market will likely be the first of many by established global gaming operators.

The creation of the resort is expected to have a significant knock-on effect on the online sector, with visitors expected to demand the same freedoms they enjoy when travelling elsewhere in the world.

With a competitive tax rate in place, online gambling operators will increasingly be able to leverage the opportunities presented by the UAE market.

Given how the UAE and other Middle East nations look set to benefit from investments made by online gambling operators, India’s implementation of a 28% levy looks rather draconian.

It will be intriguing to see how things pan out over the coming months and whether the GST Council revises its decision when it undertakes the six month review it promised.