Players often get worried about the sum of money they can bring home by playing casino games. Especially in the countries where gambling is not regulated, the taxation and legislation are quite confusing. Are you worried about paying taxes on your casino winnings in India? Read more to learn about the tax implications on online gambling in India. 

This guide contains information regarding gambling laws and regulations including licensing, taxation, and relevant authorities in India. As the only law governing gambling in the country was created in 1867 and since then there has not been any improvement in the legislation, the legal state of online gambling is vague in India.

Players from India can choose any casino from the hundreds of available offshore websites and enjoy gambling on their preferred game. However, they have to pay taxes on their casino winnings. Keep reading to know about the mandatory tax on casino winnings in India. 

Why Online Casinos in India Must Be Brought Under GST Taxation?

The popularity of online casinos in India is growing. Many offshore casino companies are now offering their services to Indian players. As this popularity is constantly on the rise, players often get worried about the legality and tax implications on online gambling. 

Experts are suggesting bringing online casinos under GST taxation. There are many reasons to say so including the vast gambling market that this second most populated country possesses. If online gambling is legalised in a country of around 1.36 billion population, a good amount of additional revenue can be generated.  Before we proceed further, let us take a quick look at the basics of GST in India so that you can easily understand the whole guide.

The Government of India had introduced a new form of taxation that replaced all central and state taxes including value added tax (VAT), service tax, and excise duty. GST is implemented on the value addition at each stage. In simpler terms, this is a single tax from service providers to the consumer. Earlier there were different laws for different taxes but now GST has changed it to the only one law.     

The additional revenue gained from taxation can be used in greater goods such as healthcare and education. India is one of the leading financial markets in the world. When it comes to online gambling, a large demographic of people indulge in it even if it’s vaguely illegal. 

Almost 40% of Indians actively indulge in forms of online gambling such as online casinos, sports betting, and lotteries. So, if online gambling is legalised in the country, many Indian gamblers would be contributing some form of tax to the country. This will surely benefit the Indian economy.

• The recent pandemic has affected economies worldwide. However, the online gambling industry has witnessed a huge spike in the numbers of players. There has also been an incredible rise in the popularity of different casino websites in India.

• Indian gamblers love the idea of making money from playing online casino games. While gambling on offshore casino websites they have to pay a certain tax to the casino operators. 

• Now, considering the fact that offshore websites are generating revenues from the Indian gambling market, online casinos in India must be brought under the Goods and Services Taxation. 

• Bringing online casinos in India under GST can be beneficial for both the central and state government in terms of better administration, revenue collection, and the effectiveness of laws.  

Do Online Casinos in India Pay Tax to the Indian Government?

As almost all the online casinos in India are foreign-registered casinos, they do not pay taxes to the Indian government. India has not yet legalised online gambling and there is also no rule that regulates gambling in the country.

Aside from this, there is no such authority that monitors casino businesses in India. This is why foreign casino companies register themselves under the most reputed offshore gambling regulators such as Malta Gaming Authority and the UK Gambling Commission.

These popular regulators allow casino businesses to operate in different countries except the places where gambling is restricted. Foreign-casino companies are required to pay licensing fees to the gambling authorities.

However, the rule is totally different in the Indian states Goa and Sikkim where casinos are legal. Casinos play an important role in the tourism industries of these states. Goa and Sikkim generate huge tax revenues from gambling. Overall, online casinos in India do not have to pay taxes to the government as they are not legalised in the country.  

Tax to Indian Government is Paid By Casino Winners in India

In India, a universal 30% taxation is implemented on the winnings made by players on different forms of gambling. However, there is no specific legal framework around the gambling due to which it is quite difficult to realise the full potential of tax revenue in India. 

In countries such as the UK and Italy, gambling has a huge contribution to their Gross Domestic Products. India can take cues from these countries and improve its tax revenues. If India ever legalises online gambling, there will be many benefits of it including players’ protection and increased tax revenues.

According to the Indian Income Tax laws, winnings from lotteries or card games that exceed a threshold of INR 10,000 would be subjected to a mandatory tax of 30% (without any surcharge and cess). Additionally, the government has brought a new tax which applies to Indian residents (in case of winnings) who access the offshore online casinos through an Indian IP address. However, many people argue that this tax should not be applied to players. 

How is Casino Winnings Taxed in India?

There are separate tax conditions for different income groups that we are going to mention here: 

• Government of India has implemented a net 31.2% tax rate after cess for all casino and gambling winnings by the players. The flat rate is 30% for casino winnings. 
• Taxes can be increased to 34.32%. Greater the winnings by players, the greater the tax. 
• If a player wins more than INR 50 Lakh, a 10% surcharge is implemented which makes the tax rate a total of 33%.
• Due to a 15% surcharge, tax of 34.5% is implemented if a player’s gambling income exceeds INR 1 crore. 
• Players have to pay an additional tax rate of 28% on their casino earnings.      

Benefits of Bringing Online Casinos Under GST

We have briefly mentioned in the above sections that bringing online casinos under GST would benefit the country in many ways. To elaborate it further, we have listed some important points that show the advantages of implementing GST on online casinos in India. 

Boost in Government Revenue

Gambling has always been a part of Indian culture and tradition. Many people play gambling games during festivities such as Diwali. Aside from this, the craze for cricket has also developed people’s interest in betting on IPL and other leagues. 

As per March 2019 reports, the size of the sports betting market alone in India is worth around $150 billion. Many reports have also estimated that India had a turnover from gambling and betting related activities of approx 7.5% in 2016. This shows the potential of the Indian iGaming market. 

Imagine if the country had legalised online gambling and collected 30% tax on all winnings by the players. Also, the country would be able to regulate online casinos and generate a massive tax revenue.

While the government is struggling to improve the effects of the global pandemic, it would be better to tax online casinos and gambling as it seems an effective solution. Furthermore, the top offshore casino operators follow all the necessary precautions to respect the gambling legislations in the country. Due to lack of a proper GST taxation law for online gambling, offshore casino operators find it difficult to enforce the mandatory GST tax of 28%. This is because the government of India has set a GST on a separate gambling category that includes land-based casinos and racecourses.     

Regulation of Online Casinos

Bringing online casinos under GST can help the government regulate online casinos. This could help ensure the safety and privacy of Indian players. Today, many offshore casinos are offering India-specific products to attract gamblers from India.

However, they can change the rules or even stop offering casino products to Indians at any time as they are not bound to any regulations made by the Indian government. So, if online casinos in India are brought under GST, both players and the government would getty benefitted from that.

In case a fraud happens to a player from India on any offshore casino platform, only the relevant authority that monitors the casino would be able to solve the issue. Indian players can not rely on their own government as there is no defined legal framework and gambling is prohibited according to the government.

Also, in terms of privacy of user data, foreign-based casinos seem a threat to the country. Moreover, the offshore casino operators may also charge higher taxes to players. So, having a dedicated infrastructure for online gambling and licensing casinos will be helpful in ensuring the privacy and safety of Indian gamblers and their data. 

Government will Have More Control Over Online Gambling Activities

Another benefit would be that the government will update the gambling laws in the country to meet the latest trends and requirements in gambling market. Moreover, the government will also be able to take preventive measures against any disputes or problem gambling. So, there is not only any opportunity to improve the tax revenue but also a chance to control gambling activities in the country. 

For example, many European countries provide licences to the casino businesses and generate a whopping sum of revenues along with monitoring the gambling activities within their jurisdiction. 

Foreign Gambling Companies will Set Up Base in India Increasing Jobs and Revenue

If the Indian government ever legalises online gambling, both local and offshore casinos will be able to open and offer their products in the country. The growth of online casinos in India will result in the rise of employment opportunities. As we all know the situation that the Indian economy had went through during covid times. 

If we take a look at other countries where gambling is legal, revenue generated from online gambling has helped them to maintain their GDPs during the pandemic. So, aside from generating job opportunities to citizens, online gambling can improve tax revenues when the other sectors’ revenues will be dropping down. 

This was all about the benefits of bringing online casinos under GST. From generating impressive revenues to creating job opportunities, online casinos in India have many things to offer if regulated correctly.

Challenges to Bringing Online Casinos Under GST in India

Despite having the second most-largest population and one of the fastest growing economies in the world, India may have to face many challenges to bring online casinos under GST. After researching about the state of online gambling in India we have listed the following challenges that this country has to face in bringing online casinos under GST. 

Various States Have Their Own Laws for Online Gambling

In India gambling is a state subject. The Public Gambling Act of 1867 is the only single law that prohibits the running of gambling houses across the country. However, as per the Public Gambling Act of 1867, each state in India has the right to formulate their own laws governing gambling in their jurisdictions. 

While some states have legalised casinos and gambling, some are taking strict measures to prevent gambling within their jurisdiction. For example, Goa and Sikkim have legalised casinos while states like Andhra Pradesh and Karnataka have put a ban on online gambling. Now, in order to bring online casinos in India under GST, the government has to take the bulls by the horns.  

Foreign Countries Like Malta Offer Favourable Environment to Casinos

The legalisation of online gambling is still a new concept in India. As online gambling is still in its infancy in India, there are many basic things that need to be done first. Furthermore, there are already many reputed gambling authorities out there that offer a favourable environment to online casinos. 

For example, Malta Gaming Authority is one of the topmost gambling regulators in the world and has hundreds of online casinos and sports betting sites licensed under it. Some of these gambling sites also operate in India without any hindrance. Gambling authorities like MGA and UK Gambling Commission offer fair gaming opportunities to players using safe payment gateways. 

They actively work to prevent issues such as money laundering, problem gambling, and unfair games. Gambling authorities make sure that casino operators follow preventive measures for responsible gambling. 

As MGA has been in the gambling industry for a very long time, players from all over the world trust the online casinos licensed under it. If we consider the popularity, credibility and the additional reliability that offshore authorities like MGA have, it would be quite difficult for India to offer the same favourable gambling environment to casino operators in the future. 

Infrastructure and Dedicated Committee Required for Supervision

A well-planned and structured legal framework has helped countries with a successful regulated gambling market to improve their tax revenues. Despite having a potential gambling market, India can not take advantage of it as there is neither any infrastructure nor any dedicated committee to supervise gambling. 

The lack of a regulatory framework is the reason why foreign-casino companies are benefiting from the Indian gambling market. In a country where around 40% of its population indulge in online gambling, a dedicated committee would be required to bring online casinos under GST. 

In India itself, states like Goa and Sikkim have legalised gambling and the respective governments offer licences to the casinos within their region. These state governments implement relevant taxes and an additional GST of 28% on both the casino operators and the players. So, the outcome of imposing taxes on online casinos in India depends on whether they are based in the gambling-friendly Indian states or operating from a foreign country. 

Final Words

This was everything you needed to know about the tax implications on online casinos in India. From the benefits of bringing online casinos under GST to challenges to do so, we have covered the latest updated gambling information for you. Online casinos in India are already taking effective steps towards regulating their gambling activities by allowing customers to go through the KYC (Know Your Customer) process. They are also allowing players to transfer funds via convenient payment options such as Bank Transfer. Now, it is time for the Indian government to pave the way forward and legalise online gambling first. 

Majority of Indian gambling is underground and unregulated. This is high time the government should legalise online gambling and improve the tax revenues. Similar to other countries, India should also realise the incredible tax potential of its gambling market and develop laws accordingly.