Industry experts are calling on the Indian government to banish higher Goods and Services (GST) taxes for online gambling companies to stave off a dearth in foreign direct investment (FDI).
There are fears the hike in taxes will drive more users towards the underground market and ultimately lead to the sustaining of illegal betting operations.
An article from the Financial Express quotes the Federation of Indian Fantasy Sports (FIFS) as saying: “For skill-based online games, such as fantasy sports and rummy, platform owners have no right, title or interest over the prize pool amount. In some cases, this amount is received and held by a third party or independent custodian for and on behalf of the players. The prize pool does not form part of the value of services provided by the platform, and hence, at present, no GST is being paid by the technology platform on the prize pool. However, if the contest entry fee is taxed, the burden increases on both parties (gaming platforms and users), the barriers to entry become high and the FDI attraction drops. Inevitably, this will lead to proliferation of a parallel black market”
Why is a high GST causing headaches among proponents of gambling legislation? Why is it not in the government’s interest? How will higher GST negatively affect customer player safety?
How Popular Is Betting In India?
The goal of uniform sector regulation is to ensure gambling remains as safe as possible for its customers.
Experts argue that by hiking the GST, the government risks turning hundreds of thousands of bettors back into the arms of black money markets.
A paper from gambling industry analysts ENV Media – titled Sports Betting: India’s Favourite Sports Betting Giant – highlights the popularity of online cricket betting in India, and why the sector urgently requires regulation.
The study writes: “When India’s national cricket team plays a One-Day International match (ODI), illegal betting amounts to around USD 200 million per game. The combined amount over the year, including the League season and any international competitions, reaches USD 150 billion (~Rs 10 lakh crore in 2016 exchange rates), according to the International Centre for Sports Security, a think tank and lobby group based in Doha. This amount is quoted in more recent industry (legal) reports as USD 130 billion.”
The paper further argues that referring to already-existing international guidelines will ensure authorities maximise the benefits of full regulation: “Ultimately, the sports betting market spans across the nation and needs Central (rather than State) regulation. Adopting clear, intuitive, and effective laws would lead to more transparent and responsible betting, and such bills should draw inspiration from international best practices.”
Why Higher Goods And Sales Tax Is Beneficial To Dark Money Betting Operations
There are several ways in which underground betting operations could benefit from higher GST levels – not least a guarantee of business continuation.
Thousands of sports fans acting on cricket betting tips, for example, are likely to question why they would bother backing their fancy at a legal, regulated site when any winnings will be taxed. In comparison, illegal operations should ensure any winnings are tax-free. Tax-free winnings are hardly a USP for a betting site – indeed, the vast majority of online bookmakers in India and elsewhere around the world ensure zero taxes on any winnings for the consumer. Employing a higher GST rate will likely drive bettors back into the arms of dark money betting sites.
Many experts believe proper taxation of regulated gambling companies is the only way forward for the government to realise the extensive potential benefits to regulation, which includes the potential to establish a booming jobs sector and better protection to its citizens.
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