Illegal betting dents tax kitty by Rs 3.89 trn

Revenue Drain

♦ Govt should force offshore operators to register in India

♦ So that it can protect the outflow from legal gaming platforms to offshore platforms

♦ Baseline estimated deposits of Rs8.2 lakh crore ($100 bn)

♦ At 28% GST, India losing Rs2,29,600-cr tax per annum

♦ Further, TDS on player earnings estimated to be 90% of post GST deposits

♦ This works out to another Rs1,59,408 cr in taxes

♦ It makes total tax loss stand at Rs3,89,008 cr

While the ICC Men’s Cricket World Cup is underway, Think Change Forum (TCF), an independent think tank dedicated to innovative ideas, has released a report titled ‘State of the betting & gambling industry in India’ that has lauded the Indian government for swift action to regulate online betting in the country.

According to the report at a baseline estimated deposits of Rs8,20,000 crore ($100 bn), being received from India, at current GST rate of 28 per cent, India is losing a GST collection of Rs2,29,600 crore, per annum. In addition is TDS on player earnings which are estimated to be 90 per cent of post GST deposits. This works out to another Rs1,59,408 crore in taxes, making the total tax loss stand at Rs3,89,008 crore.

This still does not include tax loss from corporate taxes and taxes on foreign entities. To arrest this loss, the report recommends strict implementation of the new GST regime by establishing a task force to monitor illegal offshore betting activities and forcing offshore operators to register in India to protect the outflow from legal gaming platforms to offshore platforms. Without such stringent measures, the new regime could lead to the diversion of growth from legal gaming companies to illegal betting platforms and offshore operators, resulting in substantial tax losses for the government.

The report lauds the government for introducing a progressive regulatory framework by proposing to amend the IT rules to regulate online gaming and setting up of self-regulating bodies called SROs.

However, unless these measures are rolled out rapidly, the new GST regime will divert growth from legal gaming to illegal betting and offshore players.

As per the report, the offshore sports betting market receives an estimated Rs8.2 lakh crore ($100 billion) per annum in deposits from India and has been clocking a rapid growth of 20 per cent per annum in the last three years post the pandemic.

60,000 jobs at risk

Encouraged by the new GST regime, illegal platforms have launched unrestrained promotional campaigns, boldly claiming that their offerings are exempt from GST and other taxes. This enticing proposition suggests that users can claim their entire winnings. As a result, high decibel advertising campaigns by offshore betting platforms can be seen during the ongoing ICC Men’s Cricket World Cup.

In terms of job losses within the legitimate Indian online gaming industry, the report estimates that roughly 60,000 jobs could be at risk. This situation would deprive the industry of the potential to create around 20,000 skilled jobs.