Citing the impacts of the Trump tariffs, Indian prime minister Narendra Modi has announced a sweeping set of tax changes to put the country’s economy back on track. This, according to a top official quoted by Reuters, will include consumption tax reforms such as slashing the top level of GST from 28% to 18%. However, in bad news for the gambling industry, products such as alcohol, real-money gaming and tobacco may be subject to a 40% sin tax.

The PM said, “This Diwali, I am going to make it a double Diwali for you. Over the past eight years, we have undertaken a major reform in the goods and services tax. We are bringing next-generation GST reforms that will reduce the tax burden across the country.” It follows India’s decision that gaming operations were liable for the 28% rate in July 2023, which has been highlighted by expert observers as being extremely damaging for the country’s nascent online gaming sector.

The final decision will reportedly be taken by the GST Council in October. The Council is chaired by the Union Finance Minister and includes the finance ministers of all states and union territories with legislatures as members.

GST Hike Could Devastate Industry

If the gaming GST is hiked, it will mark another blow for the country’s gaming industry, which has experienced rapid growth in recent years amid attempts to evolve its regulatory framework. Despite several moments last year when the sector was hopeful the tax might be reduced, the GST Council ultimately chose not to address the matter.

The tax applies to both regulated and unregulated offerings and resulted in both Bet365 and Super Group opting to exit the market after the rate rose to 28% in October 2023, with gaming having previously been placed on the 18% slab. Ernst & Young and the US-India Strategic Partnership Forum (USISPF) wrote a joint report in June 2024 that investigated the tax’s impact on the sector.

Expert Insights on Sector Challenges

The report said: “Despite its promising trajectory, the industry currently stands at a critical juncture faced with challenges exacerbated by the recent GST amendments and regulatory ambiguities. “The impact of the amendment is evident from the declining active user base, widespread consolidation, closures, layoffs, and a growing trend of companies seeking operations abroad.”