Can Legalising Online Gambling Help India Improve its Tax Revenues?

Gambling has long been a part of India’s tradition throughout its history. Whether it is playing card games during Diwali to appease the Goddess of Wealth Lakshmi, or putting money in IPL online betting, the appetite for gambling - sports and casino games, is big among the Indians and players enjoy cricket odds at websites such as 10Cric

So big that even the obscure, murky laws around gambling in India do not deter them from betting. Whether it is a game of chance or skill, whether it is cricket betting, football betting, or simply playing online poker, Indians have got the means to do it and they are doing it full-fledged. And here’s the kicker - all of this is widely unregulated.

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There are no dedicated laws or an established framework for India's online gambling activity right now. It is widely unregulated and a majority of it is underground.

While this is definitely terrific for Indian players who get a chance to make some money and grow their wealth, what about the government and authorities who are missing on taxation? What about the subtle, indirect impact that this massive financial betting bubble is leaving on India’s GDP? Let’s take a look.

Incredible Tax Potential

If we are to go by a March 2019 report published by KPMG on sports gaming in India, then the size of the Indian sports betting market is upwards of $130 billion and it was the case only a few years ago. By now, it is expected that the same number is upwards of Rs. 15 lakh crore.

Some reports also estimate that in 2016, India’s turnover from betting and gambling was approximately 7.5% of its GDP.

Let’s just stop for a second and assess what this could mean in terms of taxation. A flat 30% tax on any gambling winnings could potentially translate into lakhs of crore for the government to put to good use. Imagine having that kind of a fallback during times like the Covid-19, where the revenues on all fronts have dropped down.

But that’s not all - by legalising and taxing sports betting and gambling, you also take people from the illegal, unregulated markets and bring them in the structured fold where their interests and information are protected and respected. Moreover, regulating the same can also help in curbing black money, money laundering, and reducing corruption in sports.

And not to mention the increased viewership in the sporting events once it becomes legal to bet. It will create a ripple effect that will benefit the broadcasters, sporting franchise and tournaments, and even the viewers.

So, What Can be Done?

Currently, there are taxation laws on gambling winnings, which puts it flat at 31.2% including cess. However, in the absence of a corresponding legal framework around the activity itself, it may be hard to realise the full potential here. India can definitely take cues from countries like the UK, Australia, and Italy, where betting its inadvertently linked to their respective GDPs.

Having a structured, well-planned legal framework around online gambling has helped these governments improve their tax revenues and protect consumers' interest in the process. India is already halfway there, thanks to the stringent KYC measures levied by the betting sites. It is now up to the authorities to pave the way forward.