India’s real-money gaming sector is staring at a fresh tax impact after the government signalled a new GST architecture with a special 40% rate for sin and luxury categories.
While final itemisation will be decided by the GST Council, industry stakeholders fear online money gaming could be clubbed in this bucket, sharply lifting the tax incidence beyond the regime introduced in October 2023. Government always maintained online money gaming as part of sin goods.
GST on online gaming – second round of reforms?
In the 2023 reforms, Parliament and the Council shifted online money gaming to a 28% GST on the full value of deposits or bets, replacing the earlier approach of taxing only the platform fee. That framework took effect from 1 October 2023 through amendments to the GST law and rules. The tax department maintains the 2023 amendments as only clarificatory in nature.
“This still appears to be an initial proposal as per press reports and has not been discussed either in any of the GoMs/committees of the GST Council or the council itself,” said Jay Sayta, Gaming and Technology Lawyer. “The industry will need clarity on whether such a high rate is indeed being considered and, if so, how it will be applied in practice.”
GST slab revamp and impact on online gaming
Reports following the Prime Minister’s Independence Day address say the Centre is pursuing a two-slab structure for most goods at 5% and 18%, along with a separate 40% rate for a narrow list of sin and luxury goods. If online money gaming is expressly designated in this 40% category, the sector would face a second escalation within two years, compounding compliance complexity and cash-flow stress that began with the October 2023 shift to face-value taxation. The Council will have to clarify scope, valuation mechanics, and transition rules to avoid double counting and to align with the treatment adopted since October 2023.
The legal backdrop is equally consequential. On 12 August 2025, the Supreme Court reserved judgement after an extended 31-day hearing in the Gameskraft batch that tests the foundation of the government’s GST stance on online gaming, casinos, and horse racing. The proceedings saw more than 90 hours of arguments before the bench reserved its order, setting up a ruling that could influence how actionable claims, consideration, and valuation are interpreted for money gaming under GST.
“Even if there is such a proposal, it is unclear whether the 40% GST will be on the initial deposit or on the globally accepted principle of Gross Gaming Revenue (GGR), or if a certain abatement will be provided on the deposit value and 40% GST will be levied on such amount,” Sayta added. “The correct valuation mechanism for online real money gaming will also be decided in the Gameskraft case by the Hon’ble Supreme Court where after extensive hearings the apex court has reserved verdict.”
For players and platforms, the immediate questions are whether entry deposits, bonus structures, and player-to-player pots would be taxed at 40%, how transitional play would be treated if the slab changes mid-cycle, and whether state-level enforcement aligns with central rules.
The sector has already faced show-cause notices and litigation linked to the October 2023 changes, and another upward shift could accelerate consolidation and push smaller operators to the brink.
