In India, online games that do not involve any form of betting or gambling attract an 18% goods and services tax (GST). This rate contrasts with the 28% GST applied to gambling activities. Any GST is paid on company revenues and not total turnover, which means that players are not charged extra for costs such as competition entry fees.
A group of ministers (GoM) set up by the government recommended that all online games and casinos should pay GST at the higher 28% rate as they are premium consumption. It was also suggested that tax should be paid on total turnover, which would raise costs for end users. The complaints which followed this recommendation led to a delay in the final report from the GoM that is still ongoing. To understand this situation and how it will affect casino workers, it helps to look more closely at the cause of the delay.
What is the cause of the delay?
The government originally created the GoM in May 2021, and the group made the original recommendation to tax online games and casinos at the 28% rate in June 2021. It also recommended that tax should be on total turnover, including any player participation fees.
The state of Goa objected to these recommendations. The grounds for this objection involved the proposal to tax the full-face value of chips or coins purchased by end users. Taxing in this way does not take into account the fact that the entire purchase amount is not always spent on gambling. Some of the cost involves the purchase of food and drink.
Following the objection, the GST council asked the GoM to look again at the situation regarding casinos, horse racing, and online gaming. The group was expected to submit a report by September 2022, but this did not happen, and there continues to be a delay. This delay is a source of concern for gaming start-ups in India that have expressed a belief they will struggle to survive if GST rates increase. There is also potential for a significant effect on casinos and their workers.
The effect of the delayed decision on casino workers
There is a difference between the effect of the delay on online casinos and the effect on land-based casinos. In the case of online casinos that operate in India, only Goa, Daman, and Sikkim allow online casinos to operate legally. The result of this is that gambling mostly takes place at offshore casinos, which do not pay tax in India. So, the companies and their workers are not affected by the delayed GST decision.
The situation with land-based casinos is different. These casinos still only operate in Goa, Daman, and Sikkim, but the ones that do operate all pay GST as they are based in India. If the rules regarding the payment of GST change to include total turnover rather than revenue, this would lead to an increase in costs for end users. If these costs increase, it’s likely that fewer people will visit. A reduction in visitor numbers could lead to workers being laid off, and casinos may even close. This situation would obviously be impactful on casino workers, and they are waiting to see if it will come to pass.