India approves 28% tax on online gambling, horse racing, and casinos - company shares fall after the decision

According to Vivek Johri, chairman of the Indirect Taxes and Customs Board, the move will also affect casino operators as the tax will also apply to the value of chips that a person buys before playing.

News agency Press Trust of India (PTI) quoted Sitharaman as clarifying that the decision to levy maximum tax on online gaming and casinos is not aimed at destroying the industry. However, she said that because of the "moral question" posed by gambling, it cannot be taxed at par with essential commodities.

"We are looking solely at what is taxed because it creates value, the profit derived from the bets that people win. Today's decision looks at what should be taxed and what should not be taxed," Sitharaman said. She added while the Ministry of Information Technology (IT) is looking at the regulatory aspect, the GST Council has taken the decision purely for tax purposes.

Explaining the reasons for imposing the 28% tax on online gambling, Sitharaman said it was "impractical" to meet the industry's demand for a levy on the platform as it was impossible to prosecute players, nor was it possible to establish where the bets were placed.

"It is impossible to pierce the veil of opacity," she said, adding that all states agree to tax at the highest rate of full face value.

Increasing tax on online gambling to combat addiction

Officials and ministers at the meeting said the decision to increase tax on online gambling and casinos was partly taken to wean youngsters away from addiction. 

Revenue Minister Sanjay Malhotra confirmed that the decision was taken long ago and that the government will fight those who challenge the decision. He said: "The 28% tax has always existed. Today's decision is only to bring clarity and end this debate."

An amendment to the GST Act defining online gambling, horse racing, and casinos as "claimable claims" is likely to be passed in the upcoming session of Parliament, local media reported.

The All India Gaming Federation (AIGF), representing companies such as Nazara, GamesKraft, Zupee, and Winzo, said the GST Council's decision was "unconstitutional, irrational, and egregious."

Roland Landers, CEO of AIGF, commented, "This decision ignores over 60 years of jurisprudence and equates online gambling with gambling. This decision will destroy the entire Indian gaming industry and result in the loss of many jobs, and the only people who will benefit will be the anti-national illegal offshore platforms."

Shares of Indian online gambling companies are plummeting

Reuters news agency cited industry experts who believe that the move will have a negative impact on the revenues of the billion-and-a-half-dollar online gambling sector. At the same time, the additional costs are likely to fall on the shoulders of customers.

Shares in Indian casino operator Delta lost more than a fifth of their value, while other companies also fell after the regime was introduced. The operator itself owns casinos in the states of Goa and Sikkim, as well as the websites Adda52rummy.com' and 'Adda52.com stock'. The stock closed down about 23%.

Also, shares of Nazara Technologies, which licenses games for some children's brands, were down 2.6%, while Onmobile Global's shares were down 1.1%. They had earlier fallen as much as 14% and 9%, respectively, before pulling back.

Nazara told the news agency that it expects a minimal impact on revenue, as the new rule will apply to those games that had a 5.2% share last year.

The move is likely to affect large Indian startups such as Dream11, which sponsors India's national cricket team and is valued at $8 billion, and Mobile Premier League (MPL).