Equating gaming with luxury goods and clubbing it with ‘sin goods’ in the highest slab of the goods and services tax (GST) regime of 28 percent may have been a curse for many but has, surprisingly, also become a boon with regulatory measures curbing the illicit operations of offshore betting firms with little accountability. The closure of platforms such as Betway and Bet365 indicate a potential decline in offshore betting activities within the country.
Beltway, the Malta-based online gambling platform offering sportsbook and online casino services, recently announced the end of its operations in India. Attempts to download the platform now display a message stating, “We regretfully have elected to cease trading in your region. We will work with you to return any outstanding balances.”
Betway and similar platforms had been operating openly in India, enticing customers with catchy slogans and graphics. They sought to establish legitimacy by featuring endorsements by well-known sports and entertainment figures such as TV personality Rannvijay Singha for Betway, Hindi actor Ranbir Kapoor and Hindi, Haryanvi and Punjabi rapper Badshah for Fairplay, Bollywood’s Nora Fatehi for Sportsexch and many others. Most recently Betway was even seen advertising on popular television channels during the Ashes 2023 England-Australia cricket tournament.
How is the introduction of the 28 percent GST helping?
“In order to bring offshore gaming companies on a par with the domestic online gaming companies, the government has introduced a tax of 28 percent on the total funds collected by online gaming companies from users/gamers and not on each and every bet, i.e., the full bet value. One of the other major another idea behind the introduction of the new raised tax on the full bet value on all online gaming companies is to bring under the purview the rampant suspected money-laundering schemes illegally run by offshore online gaming companies,” said Shivani Bhushan, senior associate at boutique law firm TAS Law.
The resultant effect of this is that all offshore online gaming companies operating in India will have to mandatorily be registered locally or will have to appoint a representative to pay the taxes collected on the full bet values. If they fail to comply, such gaming companies will be blocked from providing their services in the country.
Experts foresee the offshore online gaming business decreasing in India as they will now lose the tax arbitrage they enjoyed, and also due to increased competitions from domestic online gaming service providers.
“This imposition of (the new) tax regime is also keeping in mind the severe risk imposed to the financial security, privacy and wellbeing of citizens, as Indian online gamers were/are at risk of being exposed to nefarious and unscrupulous platforms that are not under the scrutiny of the Indian government,” Bhushan explained.
The anomalies
However, the All India Gaming Federation highlighted that there are several states where the amendments have not been incorporated in their respective GST laws and hence the notification may stand suspended till such time all states have carried out the amendment.
Some platforms are using their rivals’ closure to promote their own offerings. Fun88, for instance, is circulating promotional messages announcing the closing of Betway and calling themselves “the only legitimate global brand in India”, while offering a 300 percent welcome bonus.
What were the loopholes these platforms were using to operate in India?
Disguised as content platforms, offshore betting companies had been a significant presence in India for quite some time. Their advertisements often feature QR codes that once scanned redirect users to WhatsApp business accounts. These accounts provided access to websites, complete with usernames and passwords, allowing individuals to place bets.
“Offshore betting platforms exploit various loopholes to operate in India, operating from lax regulatory jurisdictions and obtaining foreign licences. The digital nature of their operations, along with the unclear gambling laws in India, aided their cause. Evading taxes and adhering to FEMA (the Foreign Exchange Management Act) rules, they manage to function in a legal grey area. Tactics like domain shifting post-ban, and collaborations with local entities further facilitate their operations,” said Aviral Kapoor, partner at Alagh & Kapoor Law Offices.
What will the platforms do now?
“In the light of recent regulatory updates, offshore gaming platforms operating in India are now under stringent compliance scrutiny,” Kapoor added.
The government has mandated these entities to officially register within the country, ensuring transparency and adherence to the 28 percent GST slab. Key compliance areas include the clear display of rules, privacy policies and user agreements on their platforms. Additionally, platforms are required to appoint resident grievance officers, chief compliance officers and nodal contact persons, all based in India.