Step into the time machine and set the dial to 1867, the year when the foundations for gambling regulation in India were laid with the enactment of the Public Gaming Act. This pivotal legislation sanctioned certain gambling activities, with strict guidelines – lotteries and horse racing were in the clear, but operating public gaming houses was firmly off the table. Caught in the act of running one such establishment could land you a fine of ₹200, a substantial amount at the time.
Yet, the framers of this law could not peer into the future to forecast the digital revolution and the complex issues of online gaming oversight it would present. Despite a large base of eager sports and gambling enthusiasts, online gaming meandered in a gray area, awaiting legislative clarity.
Fast-forwarding to recent years, strides towards legalizing online gambling and sports betting have been made. In a move indicative of India’s strong affinity with cricket, the Supreme Court in 2016 favored legal calls for betting’s official sanction. During this reformative period, the Nagaland Government mulled over the Nagaland Bill, a forward-thinking piece of legislation aimed at framing the regulation of online gaming, particularly skill-based online games, within India.
April 2016 marked a significant milestone as PB Acharya, Nagaland’s governor at the time, ratified the bill into law. Consequently, online gaming found itself predominantly regulated by state authorities, each carving out its own set of rules.
Transition to the present day, and you’d observe an intensive push to definitively categorize online gaming in India. The distinction between games of skill – betting and winning predicated on skill, such as rummy (recognized as such since 1968) – and games of chance, which encapsulate all legal gambling formats, is pivotal for legal operations across the nation.
The advent of Self-Regulatory Organisations (SRBs), ushered in by the amended IT Rule 2023, signaled the inception of a hybrid regulatory framework. Through this amendment, a partnership between the IT Ministry and SRBs took shape, providing the industry, rather than a sole government body, the authority to define games. This conferred greater flexibility and control to industry players.
Dr. Aruna Sharma, an economist and ex-official of the Indian government, shed light on the significance of SRBs, citing their foundational role in delineating these operational parameters. These organizations, bound by their code of conduct, have taken steps towards promoting responsible gaming.
Amongst the obligations of SROs are the establishment of frameworks granting access to gambling harm prevention information, implementation of KYC (know your customer) checks, an operational base within India, and a system for processing complaints. While these legislative developments suggest a steadily maturing online gaming industry in India, a looming financial thunderstorm threatens to dampen the growth.
Enter the dreaded uniform 28% GST on turnover for online gambling, casino, and horse race betting. This controversial tax announced in July by India’s GST Council was met with industry-wide reproval, voices like the All India Gaming Federation (AIGF) forecasting a stunting blow to the regulated market due to this high tax rate.
The backlash was not unwarranted. In October, following the GST pronouncement, the operator Super Group, which owns notable brands like Betway and Spin, withdrew from the Indian market. Ravindra Shinde, the CEO of Dyutabhumi Hotel and Resorts, joined the chorus of criticism, positioning the tax rate as extortionate, particularly when juxtaposed with more lenient rates in gambling hubs like Singapore and Macau.
Amidst this fiscal backlash, India’s tax authorities are pursuing the enforcement of this 28% GST on online gaming operators retroactively. The issuance of show-cause notices alleging GST evasion since 2018, amounting to a staggering ₹1tn, has sent shockwaves through the industry.
Yet there is a glimmer of hope on the horizon. A hearing slated for April 2nd at the Supreme Court presents an opportunity to contest this tax rate, similar to challenges already issued at the High Court of States. Media reports indicated that this past January, the Supreme Court had received appeals from online gaming companies to reconsider the GST decision and had requested a response from the central government and GST Council.
Despite the looming tax challenges, Dr. Sharma observes that India’s gambling market is experiencing growth and development. With the proliferation of smartphones and accessibility to the internet, the igaming market is expected to burgeon, possibly buoyed by the fact that 60% of the hundred million mobile phones in India are smartphones.
This continued growth, however, is contingent upon navigating the looming specter of GST, a variable that the industry and market analysts will be watching closely. Winning the ongoing battle over the high GST rates and their retroactive application is now a challenge that rests in the highest courts of India.
