In recent months, Indian gamers have been able to access an exciting new online gambling genre: crypto casino gaming. As with pretty much every cryptocurrency trend that's come to the fore, crypto gambling has swept the world and become increasingly popular among several demographics of residents - the sector appeals to both enthusiasts and traditional digital gamblers.
However, despite the increased accessibility of Bitcoin-focused online casino platforms, Indian lawmakers have passed new legislation that could have repercussions for both this burgeoning industry and individual crypto users. This article will examine the legal landscape of digital currency gambling in India, discussing both the new taxation laws affecting digital gambling and the tax on Virtual Digital Assets.
Taxation on Gambling in India
This autumn, a new taxation regime affecting the remote gambling sector kicked in, the Goods and Services Tax (GST). Set at 28% and applied to all online real money games, including casino games like blackjack and roulette, horse racing, and other real money wagering, the tax will be collected by the Centre and Union Territories. While gaming companies have displayed resistance to this new regime, nevertheless the Finance Ministry has now been mandated to implement the GST across all activities that are deemed “chance to win” or offer “actionable claims” for monetary prizes and rewards.
India's gaming industry is one of the largest in the world with a market cap of $10 billion. While there are plenty of entertainment incumbents operating in the space, the industry is also home to several startups, particularly in the online gambling sector. This higher rate of tax will no doubt affect startups the most, something that could then go on to have a ripple effect on the quality and innovation displayed in the platforms and gaming experiences that are available to the end user.
India's earlier crypto tax (more on that below) has undoubtedly hit the industry hard, and experts are increasingly concerned about the implications the GST will have on what should be a flourishing market.
There is, however, a clear distinction in the regime between casual remote games of a gambling theme and those that actively involve real money wagers. Social casino games, for example, see players compete against each other in browser platforms and via mobile gaming apps to win points and achieve a leaderboard position.
These games are free to play, meaning participants don't deposit or make wagers with real money, and there's no expectation of winning monetary prizes. Although this is a small comfort to iGaming operators, it does ensure that players can at least continue to access a varied range of digital gaming experiences.
India's Crypto Tax
As mentioned above, prior to turning its attention to online gambling, in 2022, the Indian government implemented the GST on all crypto transactions made within the country, whether for trading purposes or to buy goods and services. The country is known for its strong cryptocurrency user base, with many residents using decentralized currencies as a valid investment method. The arrival of the 30% tax rate meant that exchange volumes throughout India dropped substantially and have yet to recover.
Moreover, the harsh tax rate is also now accompanied by a 1% Tax Deducted at Source (TDS) rate that's tacked on to any transfer involving Virtual Digital Assets (VDAs) including Bitcoin, Ethereum, and NFTs (non-fungible tokens). Gifting VDAs, meanwhile, even virtual gold and the CDBC (central digital bank currency) will incur a tax on the part of the receiver. Another important rule that crypto users need to be aware of is that loss gained through investing in digital assets cannot be offset against any other income under the new laws.
What This Means for Crypto Gamblers
While the GST applied to digital gambling is the responsibility of operators, crypto gamblers in India do need to be aware of not just the crypto tax but the options that are available to them. Currently, the GST isn't applied to offshore gaming sites (platforms that are licensed to operate globally and are based outside the region) but the 30% VDA tax does have the potential to affect any Indian holding cryptocurrencies, NFTs, and virtual commodities.
The higher rate of tax will be applied across any of the following:
- Selling VDAs in exchange for fiat currencies (the rate will be applied to any profits)
- Trading decentralized tokens for any other decentralized tokens, including stablecoins (again, the rate will be applied to resulting profits).
- Purchasing goods and services with VDAs (the rate will be applied to any gains generated from the transaction).
Tax avoidance is, of course, illegal in India so there's no way to be completely free of the tax charge if you're a crypto gambler, investor, or trader. However, our best advice to minimize its impact is as follows:
- Invest for the long-term - we're aware that cryptocurrency is a volatile trading and investment market, but if you want to pay less tax overall it makes sense to keep your crypto investments for at least 12 months.
- Keep gambling winnings as Stablecoins - stablecoin investments typically incur less long-term capital loss. If you have the choice, keep any crypto gambling winnings as stablecoins like USD Coin, etc.
- Research Peer-to-Peer and Decentralised Exchanges - crypto analysts have found a possible grey area when it comes to DEX and P2P enhances like PanCakeSwap.