28% GST: Game Over or Game Plan?
India’s GST regime has never been shy about reshaping markets. Online gaming-one of the fastest-growing corners of the digital economy-has felt this most acutely since the uniform 28% GST came into force on 1 October 2023 for online gaming, casinos, and horse racing. What changed was not only the rate but the tax base itself: GST now applies on the entire amount a player deposits or pays (the "full face value"), rather than the platform’s fee or margin. That shift has profound consequences for pricing, compliance, business models-and for the industry’s long-term legitimacy.
What exactly changed?
Three pillars define the new framework:
1. Rate and base. The GST Council recommended, and the Centre implemented, a 28% rate on online gaming, casinos, and horse racing, levied on full face value. For online gaming, Rule 31B of the CGST Rules now states that the value of supply is the total amount paid or deposited "by way of money or money’s worth" (including virtual digital assets) with the supplier-not merely the platform fee. Refunds or returns do not reduce this value. In casinos, Rule 31C applies similar logic to chips/tickets or direct entry.
2. Treatment of re-staked winnings. A practical relaxation sits alongside this strict base: if a player reuses winnings for further play without withdrawing, those amounts are not counted again in the value of supply. This prevents infinite tax cascades as winnings circulate within the platform.
3. Offshore platforms brought into the net. Parliament added Section 14A to the IGST Act (2023), creating a special regime for online money gaming supplied from outside India. Offshore suppliers must register (via a simplified scheme), pay IGST, and face access-blocking for non-compliance-a significant step to level the field with domestic operators. Related changes also updated GSTR-5A filing and registration workflows to accommodate such entities.
Put simply, the law now taxes the money players put in, captures offshore supply, and closes technical gaps that previously let gaming escape a harmonized treatment.
Why did the Council and Parliament move this way?
Policymakers faced three intertwined puzzles:
Classification gridlock. Courts have long distinguished "games of skill" from "games of chance", with major cases placing rummy and fantasy contests on the skill side. Yet fragmented jurisprudence, changing formats, and "skill-dominant" statistical claims made uniform taxation hard to administer. The 2023 amendments introduced "specified actionable claims" framing and bespoke valuation rules, moving beyond the older proxies used under Rule 31A.
Leakage and arbitrage. With multiple state laws, foreign servers, and inconsistent tax bases, revenue authorities struggled to apply a single standard. Section 14A IGST was the missing plank to compel offshore compliance and constrain arbitrage via foreign-facing apps.
Regulatory convergence. In April 2023, MeitY amended the IT Intermediary Rules to create an online-gaming compliance spine-KYC-like verification for real-money games, due-diligence, disclosures, and a path toward self-regulatory bodies (SRBs). The tax architecture that followed dovetails with these digital-platform guardrails.
The lived impact: math, margins, and migration
For players, the arithmetic is immediate. A Rs. 1,000 deposit now carries Rs. 280 GST, leaving Rs. 720 to play with. Because refunds don’t reduce the taxable base, a player who sits out after depositing doesn’t get a proportionate GST back. The value-on-deposit design discourages "test the waters" micro-deposits and raises the effective entry cost per contest.
For platforms, working capital tightens. The platform collects GST on the gross inflow even though its economic revenue is the platform fee/GGR; prize pools remain contest liabilities. Margins shrink unless fees rise or rewards compress. Some operators have responded by absorbing part of the tax to cushion users-especially visible through FY24 when growth persisted despite the tax shock.
For the market as a whole, a paradox emerged: despite the headwinds, India’s gaming revenue grew 23% YoY to $3.8 billion in FY24, with a projected climb to $9.2 billion by FY29 (20% five-year CAGR). Real-money gaming still contributes the largest slice, while in-app purchases were the fastest-growing component in FY24. Engagement deepened too-average weekly playtime rose by ~30%, and the player base continued to diversify.
The other side of that paradox is less pleasant: legal uncertainty and retrospective demands triggered waves of litigation. The Supreme Court has since stayed wide-ranging GST proceedings and clubbed multiple petitions-including the high-profile Gameskraft [2025(01)LCX0466] matter-for final adjudication, with the core fight centering on what the tax should attach to, and from when. Until a final verdict, companies and the government operate under an uneasy truce.
Is India an outlier compared to global practice?
Internationally, many jurisdictions tax GGR (the operator’s gross profit) rather than player deposits. The UK, for instance, applies Remote Gaming Duty at 21% of gross profit. Portugal mixes models (e.g., turnover-based for sports betting and GGR-based for online casino/bingo). Tax mosaics differ, but India’s high rate on full face value is unmistakably stringent relative to GGR-based peers. That stringency explains the industry’s push to align the taxable base with platform fee/GGR or at least with net deposits (deposits minus withdrawals), to reflect economic value more faithfully.
What the new law got right
Clarity beats chaos. By writing online money gaming directly into the statutes and rules (with Rule 31B/31C and Section 14A), India replaced grey zones with enforceable text. The re-staked winnings carve-out also prevents repetitive taxation of the same funds cycling in-game.
Offshore capture. The simplified registration and blocking lever for non-compliant offshore suppliers make the regime more enforceable and nudge players toward regulated platforms.
Policy coherence with digital rules. GST’s hard edges align with MeitY’s IT rules-KYC, complaint redressal, and disclosures-laying groundwork for a safer, more accountable ecosystem.
Where the pain points remain
Tax base ≠ economic revenue. Taxing deposits rather than GGR means GST can exceed a platform’s actual margin-a design that is stable for revenue administration but destabilizing for unit economics. Prize pools and refunds are contest liabilities, not revenue.
Liquidity and pricing pressure. Higher entry costs and thinner prize pools can lower participation, particularly among casual players, and can tempt migration to unregulated offshore apps, undermining both consumer safety and tax collections-the very outcomes the law seeks to improve.
Litigation overhang. With the Supreme Court seized of key questions (including retrospective treatment), long-range investment decisions remain deferred. Regardless of who "wins," sustained uncertainty is costly.
The industry’s self-regulatory turn
Not wanting to wait for courts or Parliament, leading trade bodies-AIGF, EGF, and FIFS-have jointly adopted a Code of Ethics mandating age-gating, robust KYC, spending limits, self-exclusion tools, data safeguards, and annual third-party audits. The earlier IAMAI-curated voluntary code (Dec 2023) set a baseline; the March 2025 cross-federation code tightened expectations and timelines. This is not a substitute for law, but it signals capacity for industry-wide risk controls-a necessary condition for any later tax base relief.
A policy roadmap that balances integrity with growth
1) Shift the base to platform fee/GGR-or adopt a net-deposit alternative.
India doesn’t have to copy any one country, but taxing economic value (the platform’s fee) is both principled and practical. If administrators worry about manipulation, a net-deposit base (deposits minus withdrawals over a period), audited and reconciled to player ledgers, can be a robust second-best. Either approach narrows opportunities for arbitrage while preserving liquidity in prize pools.
2) Keep Section 14A’s offshore net-and enforce it.
The registration, return, and blocking toolkit for non-resident suppliers should be implemented visibly. When players see offshore apps exit or comply, domestic platforms no longer face a tax-arbitrage disadvantage.
3) Integrate tax with trust: make KYC and consumer tools universal.
Tie any base-shift relief to hard consumer-protection obligations-bank-grade KYC, cooling-off and self-exclusion, clear disclosures on odds/fees, spending caps, and harm-reduction nudges. This leverages MeitY’s framework and the industry’s Code of Ethics to align every rupee of tax with every safeguard.
4) Clarify "skill vs chance" without case-by-case fog.
Courts will continue to decide edge cases, but regulators can adopt transparent statistical tests and guidance (complementing the Supreme Court’s "dominant-skill" line) to offer ex-ante certainty. Clear category definitions reduce litigation, shrink compliance costs, and encourage product innovation that stays on the right side of the line.
5) Build a single-window compliance spine.
Create a national licensing registry synchronized with GST (PAN-based), IT-Rules compliance status, and state restrictions. One dashboard: registration, KYC audit status, grievance metrics, and tax filings. This reduces friction for good actors and makes enforcement easier against bad ones.
6) Use data to price risk.
If the concern is money-laundering or problem play, leverage risk-based supervision:
high-velocity accounts, abnormal win/loss patterns, and wallet funnels can trigger enhanced checks, while compliant platforms face lighter-touch inspection.
7) Time-box it: sunset review in 24 months.
Keep the 28% face-value regime as a transitional guardrail, but legislate a mandatory two-year review with hard metrics: migration to regulated platforms, consumer-harm indicators, tax buoyancy, and investment flows. If targets are met, pivot to GGR/net-deposit. Certainty is a growth asset.
What should each stakeholder do now?
Operators
Over-communicate: show players the tax math, fees, and prize-pool structure in-app.
Lean into compliance: complete KYC upgrades, spending-limit UX, self-exclusion tools, and publish independent audit summaries.
Optimize product economics: rework rake/commission and contest formats to preserve perceived value even with higher entry cost.
Investors
Focus on unit resilience: products with mid-core IAPs and community retention outperformed in FY24; keep capital for studios and platforms that design around regulatory constraints rather than against them.
Policymakers
Signal milestones: make it explicit what responsible conduct (and what data) would justify shifting from face-value to GGR/net-deposit.
Enforce against rogue offshore: consistency here is the best antidote to player flight-and the strongest case for easing the base later.
Gamers
Choose regulated platforms (registered, with KYC and grievance redressal).
Set spending limits, use cool-off and self-exclusion features, and track playtime like any other financial habit.
The bottom line: doom loop or discipline?
If left as-is indefinitely, a 28% levy on deposits risks thinning liquidity, compressing prize pools, and nudging casual players to unregulated alternatives. But as a staging ground for a clean, enforceable market-paired with MeitY’s KYC and platform-diligence stack, offshore registration, and a sunset path to a GGR/net-deposit base-the same tax can be the on-ramp to legitimacy.
India has already proven the demand side: $3.8B revenues in FY24 and a trajectory to $9.2B by FY29, even in a tougher tax climate. The policy question is no longer whether to regulate, but how to calibrate so that tax certainty and consumer safety power a market that competes globally, innovates locally, and protects the player at its core. Get that calibration right, and 28% won’t be a death knell-it’ll be the bridge to a transparent, durable, and investable gaming economy.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.