top of page

Knock – Out? – Possible Implications of GST Hike on the Indian Gaming Industry

Updated: Feb 9

by Gaurav Choudhary,Yash Bhatnagar *


The 50th GST Council Meet brought in major updates in the One Nation, One Tax regime of the country. The changes ranged from sectors like pharma, Food & Beverages, Multiplexes, Textile Industry to name some, However, the major backlash was received on the 28% slab introduced on the “full-face value of winnings” on the Online Fantasy Gaming, Horse Racing, and Casino Chips - all of which are games of separate categories.

This piece explores the possibility of the application of such high tax rates on the stakeholders in the gaming industry while elucidating the legal conundrums and economic impact on the Indian Gaming Community through such action.

Unprecedented Move?

The top federal and state finance ministers who make up the Goods and Services Tax Council [GST Council] said they had agreed to impose a 28% indirect tax on internet gambling, gambling establishments, and horse racing. The council declared that there should be no distinction made between "games of skill" and "games of chance," - which in itself is a statement of legal duplicity and creates confusion amongst industry experts.

Moreover, the Ministry of Electronics and Information Technology [MeitY] recently introduced an amendment in the Information Technology (Intermediary Guidelines and Digital Media) Rules, 2021 which identified ‘online gaming’ and winnings from Online Gaming - through which the government is looking forward to expanding gaming infrastructure in the country to promote the exercise in the country - imposing these unprecedented tax rates is totally in conflict with that particular intent.

According to industry estimates, total tax collection on player winnings will go beyond 50%, including Goods and Services Tax [GST], platform commissions, and income taxes when the new law is implemented.- this disincentivises players and goes against the global standards where only median tax rates are charged - that too on the platform fees or miscellaneous commissions that such platforms earn. This move comes at a time when gaming (specifically the Indian Gaming Industry) is a multi-million-dollar industry - especially after the onset of accessible Internet Connectivity and Smartphones in post-Covid Era- when India is the second largest online market in the world -only behind China.

It is a totally unprecedented manoeuvre not only from the point of financial modalities and changes it might bring - but also has a duplicit nature with the accepted jurisprudence on the Gaming Community - debates on which have been furloughing in the courts of India for decades.

From a legal lens - Double-dealing on a single facet

From a legal standpoint, the decision by the GST Council to impose a 28% tax on the said exercises seem to disregard the established distinction between games of skill and games of chance, as already discussed in the article. This move not only undermines the judgment(s) made by the courts but also contradicts the efforts made by the MeitY in recognizing and regulating online gaming in India. The decision to impose the same tax rate on these activities suggests a blanket categorization of all as games of chance, completely disregarding the varying degrees of skill involved in each. This approach has the potential to create confusion, hinder innovation, and discourage investment in the gaming industry.

Additionally, such a decision goes in direct contravention with the court’s decision in Gameskraft Technologies Private Limited v. Directorate General Of Goods wherein the court had categorically held that Taxation of games of skill is outside the scope of the term "supply" in view of Section 7(2) of the CGST Act, 2017 read with Schedule III of the Act. Simply put, covering such activity erodes the very distinction based on skill and chance that the courts have made over the years.

Furthermore, this decision may have unintended consequences, exacerbating the already concerning situation. By levying a high tax rate of 28% on these activities without considering the element of skill, the GST Council might inadvertently drive them towards unregulated channels. This could lead to an increase in illegal gambling and undermine the efforts to promote responsible gaming practices and consumer protection measures. The excessive tax burden, coupled with the 30% Tax Deducted at Source (TDS), creates an extreme scenario where the cumulative tax exceeds 50%. Such a substantial financial burden places an enormous strain on both operators and participants in these industries, potentially stifling their growth and sustainability.

Moreover, another aspect of concern is that the GST is levied on the full value of these activities, rather than just the platform fees or the value-added services. This approach seems disproportionate and fails to consider the nuances of these industries. Taking a parallel example, if GST were to be charged on the entire loan amount rather than the processing fee for availing a loan, it would create an undue burden on borrowers and discourage lending activities. Similarly, by imposing GST on the full value of gaming activities, the tax becomes overly burdensome and fails to accurately reflect the value of the services provided.

Financial Impact on the Indian Gaming Community

The effect of this implication may be that the stakeholders in the Indian Gaming Community may have to move towards illegal, off-shore betting schemes and games – as revenue generation from the existing online fantasy and E-Sports mechanism would be outrageously taxed. Industry experts have also proclaimed that this move will invite loss of employment for skilled engineers – for some of whom gaming is a full-time profession.

A recent study by E-Sports Welfare Association [EPWA] concluded that 83% of its interviewed subjects had gaming as their significant source of income. The proposed tax slab, if imposed, would not only jeopardize a large number of their winnings but would also take away the re-channeling opportunities these gamers may have- considering they funnel most amount of their winnings back into the gaming systems to procure profits and income as said.

Another impact would be caused on the Fantasy Gaming and Casino Industry – the Indian Casino Market is worth more than $2.6 Billion [Financial Year – 2021-22] and contributes a huge chunk to tourism in states like Goa and Sikkim. Purging their ability to generate revenue through unprecedented tax rates will not only impact the state’s tourism but Casino owners’ financial viability to host world-class gaming and trading mechanisms in their casinos.

When it comes to Online Fantasy Gaming – the net winnings in itself marked a 30% tax deduction from April 1, 2023. Now, these winnings are also marked under the 28% slab, and as of now – there is no clarification on the previously announced slab. As per the EPWA, the Application of the newly introduced tax would increase the tax on Rs.100 play from 1.8 Rupees to 28 Rupees – which in itself is an outrageous increase in taxable income.

This will discourage new players from engaging with legal fantasy sports forums and may cause huge losses to these platforms – one of which is currently the Official Sponsor of the Indian Cricket Team and will most definitely cause huge losses in terms of employment and consumer base of these platforms - who had to have a fair share of contribution in the growth of the Indian Economy.


In conclusion, the decision by the GST Council to impose a 28% tax on casinos, online gaming, and horse racing raises significant concerns regarding its economic impact on the Indian gaming community and the legal classification of games of skill and games of chance. The high tax rates, combined with the 30% TDS , create an excessive financial burden exceeding 50%. This discourages players, stifles industry growth, and drives stakeholders towards illegal betting and offshore platforms.

The proposed tax structure jeopardizes the income of skilled gamers, threatens employment opportunities, and undermines the viability of fantasy gaming and casino industries. It also conflicts with the efforts to regulate and promote online gaming in India.

To address these concerns, a more balanced and nuanced approach is needed. A fair taxation framework that considers the skill element encourages responsible gaming practices and supports industry growth should be adopted. Preserving a regulated and transparent gaming environment is crucial to protect consumers and fostering the sustainable development of the gaming industry in India.

*Gaurav Choudhary and Yash Bhatnagar are both fourth year students at Dr. Ram Manohar Lohiya National Law University, Lucknow at the time of publication of this blog.

137 views0 comments


bottom of page