India’s online gaming industry is facing uncertainty after reports indicated that the Finance Ministry is considering raising the Goods and Services Tax (GST) on real money gaming from 28 percent to 40 percent. The proposal is part of a wider plan to restructure the GST framework, which could be the most significant tax reform since GST was first rolled out in 2017.
Government’s GST restructuring plan
The Centre is exploring a simplified GST regime with two slabs of 5 percent and 18 percent for most goods and services. Alongside these, a steep 40 percent rate is being examined for five to seven categories of so-called “sin goods” such as tobacco, real money online gaming.
The proposal gained traction during a Supreme Court hearing on the ongoing GST dispute concerning gaming. The Additional Solicitor General, in a passing comment, suggested that real money gaming companies were efficient enough to bear a 40 percent GST levy. The matter will now be reviewed by three Groups of Ministers (GoMs), whose recommendations will be submitted to the GST Council. Depending on the timeline of the GoMs’ work, the Council is expected to take a decision in either September or October.
Online gaming already under high tax burden
In 2023, the GST Council shifted the taxation model for online money gaming. The sector moved from paying GST only on platform fees to a flat 28 percent levy on the full face value of deposits or bets. This system came into effect on 1 October 2023 following amendments to the GST law and rules.
The tax department has continued to describe the 2023 changes as clarificatory in nature, but industry operators have faced compliance challenges and several show-cause notices. For many companies, the switch to face-value taxation has significantly increased costs and reduced margins.
A possible move to 40 percent would represent the second tax escalation within two years. If approved, it would become the highest GST rate ever applied to the online gaming sector.
Legal backdrop and Supreme Court case
The timing of the government’s deliberations coincides with a major case before the Supreme Court. On 12 August 2025, the Court reserved its judgement after a 31-day hearing in the Gameskraft matter. The proceedings examined how actionable claims, consideration, and valuation should be treated under GST for online gaming, casinos, and horse racing.
Over 90 hours of arguments were presented during the hearings, and the Court’s eventual ruling is expected to clarify the legal foundation of GST treatment for the industry. The judgement will likely influence how future tax slabs are applied and enforced.
Questions on scope and compliance
If online gaming is expressly placed in the 40 percent GST slab, several operational questions arise. These include whether entry deposits, bonus credits, and player-to-player prize pools will all be taxed at the new rate. Platforms also seek clarity on how transitional games or deposits would be treated if the rate changes mid-cycle.
The GST Council will need to define scope, valuation methods, and transition rules to ensure there is no double taxation. Coordination between state authorities and central rules will also be crucial, as enforcement has already been a challenge under the current framework.
Market and investment impact
India’s real money gaming industry is valued at around three billion US dollars and has grown rapidly over the past decade. The 28 percent GST decision in 2023 already prompted many venture capital firms to pause fresh investments in the sector.
Industry reports indicate that a further increase to 40 percent could strain cash flows, accelerate market consolidation, and make operations unsustainable for smaller platforms. The move could also reduce player activity due to higher effective costs and compliance-related disruptions.
Next steps
The Finance Ministry has not officially confirmed any decision on the GST rate. The final call will rest with the GST Council after considering the recommendations of the GoMs. If approved, the change would mark the most aggressive tax shift for the gaming industry to date and reshape one of the fastest-growing segments of India’s digital economy.
