The governments of two countries over 2,000 miles apart but both in the midst of heated debates around gambling regulation and reform are reportedly considering a similar tax measure.

According to media reports in both countries, the UK and India are evaluating a ‘sin tax’ – a tax on goods and services seen as either hazardous or luxurious. In both nations gambling and tobacco have found themselves in the sin tax firing line.

India to add sin tax to GST

Gambling in India is a complex regulatory matter. Much of the country remains a legal grey area, although some states explicitly prohibit gambling while three have legal, regulated markets – Goa, Daman, and Sikkim.

A fourth state, Karnataka, was formulating regulations for much of this year, but has opted for a complete ban on sports betting while allowing some ‘games of skill’ such as baccarat, overseen by a planned new industry regulator.

At the federal level, gaming is subject to the Goods and Services Tax (GST) framework, which has been applied to the regulated industry since 2023 when it was increased from 18% to 28% by Prime Minister Narendra Modi.

The Economic Times, one of India’s biggest business news outlets, reports that the government is looking to update the GST framework and set different rates. Essential items will be taxed at 5%, most other goods at 18%, while products like gambling, alcohol and tobacco will be subject to a 40% sin tax.

This would substantially increase the tax burden on regulated Indian gaming firms, something which has already been seen across various other markets across Latin America, like Peru, and across Europe – such as the Netherlands, France, Germany, and possibly soon the UK.

Sin tax, share prices and market struggles

In India, the application of the GST to all gaming products from sports and racing betting to casino games has already pushed some operators out – notably bet365 and Super Group, the latter calling it quits in 2023.

A potential sin tax could make it even more difficult for both local and international firms to turn a profit. The Economic Times reports that some prominent firms involved in Indian gaming, like Nazara Technologies and Delta Corp, have already seen share prices drop.

Gaming stakeholders had little luck in convincing Modi’s government to take a different approach and apply a gaming tax on industry GGR instead of the GST, and so may not be very hopeful of convincing to change its mind over a sin tax.

It has often been argued, chiefly by gaming stakeholders, that the best way forward for India is for the country to regulate gaming at the national level, in doing so clamping down on illegal gambling and bringing much of the sector under a federal tax regime. The government has also heard calls for a complete ban on betting apps.

Regardless, it seems that the regulatory environment in India will remain fragmented while the tax burden seems set to increase even further. In contrast, regulation in the UK remains highly centralised – but the tax burden also seems set to get heavier.

Is Reeves looking at a sin tax too?

The UK’s Daily Mirror reports that Chancellor of the Exchequer, Rachel Reeves, is considering a sin tax covering gambling, alcohol, tobacco and high-fat/high-sugar foods. For the UK industry, however, this is nothing new.

The industry has been facing the prospect of a tax raise in the Autumn budget for the past couple of months, with HM Treasury proposing and consulting on a potential merger of the three types of remote gaming duty.

This has prompted concern from the industry, naturally, as well as from horse racing, which depends heavily on the industry for financial support and also objects to being potentially included in the same tax bracket as casino products, which it sees as more harmful.

Over the weekend, racing took the unprecedented step of calling a strike for 10 September in protest of the government’s proposals. The betting industry has reacted coldly to this, though it continues to protest the tax using the black market argument.

Both industries have gained some political support, namely from the leadership of the opposition Conservative Party, though some Tory MPs like Ian Duncan Smith are vocal gambling reform advocates, as well as from a minority of Labour MPs.

However, Reeves’ need to fill a big gap in public finances, variously reported as between £13bn and £51bn, as well as increasingly loud calls for the government to take a tougher approach to the gambling industry from the Labour backbenches, will likely outweigh both bookmakers’ and horse racing’s objections.

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