The Seven Sutras of Gambling and the Offshore Betting Boom: How Government's Tax Policy is Missing the Mark

 The Indian government's rationale for imposing a 28% GST on real-money gaming, known as the "Seven Sutras of Gambling," implies that any involvement of money, regardless of whether a game is based on skill or chance, transforms it into gambling. 

 

Specifically, if no money is involved, it's not gambling; however, if money is, it is. Even a fee in a game of chance makes it gambling. While a purely skill-based game isn't inherently gambling, although when playing it with stakes makes it so. Despite being considered gambling when played for money, a game of skill retains its fundamental nature as a game of skill. However, this one-size-fits-all approach seems to be doing more harm than good, thereby painting an entire sector worth more than $3.5 billion with the same brush. 

The government claimed it intended to protect consumers and combat gambling with the 28% GST; however, the unintended consequences are obvious: legal, above the board, tax complaint, law-abiding Indian gaming companies are being crushed by tax burdens while illegal offshore websites flourish and thrive without either paying taxes or following even the most basic of KYCs or age verifications. 

Such a disparity not only harms businesses but threatens millions of Indian players. The social costs are extensive: money laundering, increased harassment from loan agents, facilitating terrorist financing, and data privacy breaches. To make matters worse, the availability of cash-on-delivery betting allows at-risk minors to gamble.

India's online gaming market is slated to be a multi-billion-dollar market. It has the potential to create jobs, inspire innovation and provide entertainment to consumers. But overly heavy-handed GST and regulation can push users into the arms of illegal offshore portals. 

The "Seven Sutras of Gambling" response by the government oversimplifies a multi-dimensional scenario. What India truly needs is clear legal definitions, fair taxation, stringent regulation and to educate its people. Only then can the gaming industry thrive and benefit both its consumers and the economy. 

Let us be clear on this – the government contends that once money is involved, every game is gambling, and, as such, the government has disregarded the established legal definition of games of skill and games of chance. This regulatory philosophy is the basis for the imposition of what is one of the most punitive tax slabs on the gaming sector. 

CUTS International recently released a report that found illegal betting websites such as Parimatch, 1xBet, Stake, Fairplay, and BateryBet received a staggering 5.4 billion visits during 2024-25. Parimatch alone gets more visitors than Amazon, LinkedIn, Hotstar, and even X (ex-Twitter), an astronomical number. This is not a figure; it's a warning bell. These offshore operators have cash-on-delivery payment schemes, and allow anyone regardless their age or geography to bet and indulge in gambling despite stringent laws against it. Cash is physically collected by agents and deposited into users' gaming wallets. That is a massive red flag from a social and national security perspective.

These illegal operators often employ dark patterns on their apps and surrogate sites. Take, for example, battery.ai or battery-bet.in. These kinds of domains are imitations of technology or gaming sites, misleading both consumers as well as search engines. Battery-bet.in received 276 million visits last year alone. Using ".ai," a domain with implications of tech/innovation, gives these sites fake brand image and credibility. Moreover,  social media platforms are filled with influencer endorsements, in-built links, and viral memes featuring these platforms. Despite Meta's recent move to restrict gaming advertisements to only approved firms, surrogate advertisements through influencers has been the go-to to close the consumer gap.

Historically, Indian courts have consistently held that games largely characterised by skill do not constitute as gambling. Both the Supreme Court and various High Courts have articulated an approach to distinguish games like rummy from gambling. States like Karnataka are taking advantage of this legal perspective to take action against offshore betting sites that operate illegally within their borders.

However, the current government GST policy does not recognize these legal perspectives around gaming by treating all forms of real-money gaming as gambling, which could hamper legitimate businesses and lead users towards illegal and unsafe platforms. It is crucial for India that’s going to delve into new, forward-thinking laws related to AI, deep tech, gaming etc to have regulatory mechanisms that not only tackle fundamental problems but also leave room for new revenue heavy sectors to prosper.