High taxes pushing people to illegal online gambling as it looks at 30% growth: CSK study

High taxes and inadequate legal frameworks are pushing people towards illegal online gambling, which is projected to grow by 30 per cent in the coming years, according to a new study by the Centre for Knowledge Sovereignty (CKS), a Delhi-based policy think tank.

Despite regulatory restrictions, the illegal betting market in India receives an estimated $100 billion annually in deposits. Independent statistics cited by CKS indicate that this market grew at a 7 per cent compound annual growth rate (CAGR) from 2012 to 2018 and is expected to grow at an annual rate of 30 per cent moving forward.

Vinit Goenka, Founder Secretary of CKS, emphasized that India’s existing legal framework for online gaming is insufficient and creates an environment conducive to the operation of illicit gambling and betting entities.

He added that illegal operators are exploiting the new tax regime, which imposes a 28 per cent tax on deposits on legitimate gaming platforms, by deceiving consumers into joining their platforms under the false pretence of being exempt from GST or other tax obligations.

According to recent estimates, online gaming companies registered under the new GST regime contributed INR 3,500 crore in the October-December quarter. The central government expects to collect up to INR 14,000 crore in GST from this sector in the upcoming financial year, with a projection of approximately INR 80,000 crore over the next five years.

Goenka also highlighted that efforts by the Ministry of Technology to ban offshore betting websites have been ineffective, as illegal operators have resurfaced through new web domains. He stated that the piecemeal strategy of periodic blocking orders under Section 69A of the IT Act has not yielded the desired outcomes.

Additionally, state-level bans on legitimate skill-based gaming have further compounded the issue. For example, Telangana’s blanket ban on all online games in 2017 led to a surge in illegal online gambling activities, highlighted by a Chinese firm allegedly running a massive illegal gambling racket worth over Rs 1100 crore in the state.

CKS proposed that the government should constitute a dedicated task force to tackle illegal operators, both offshore and domestic. Furthermore, they suggested creating a “Whitelist” of companies offering games of skill, ensuring that payment gateways, hosting providers, and internet service providers only offer services to these operators.

India currently hosts around 1,330 homegrown gaming startups generating revenue of $2.8 billion, which is projected to grow at a CAGR of 21 per cent to over $7 billion by 2026. Of this, pay-to-play gaming is expected to command an 83 per cent revenue share. Forecasts suggest that AI and online gaming could contribute as much as $300 billion to India’s GDP by FY 2026-27, according to the CKS whitepaper.

(With inputs from agencies)