INDIA’S REAL MONEY GAMING SECTOR faces renewed tax uncertainty as the government considers increasing the Goods and Services Tax (GST) from 28% to a massive 40%.
The proposal is part of a wider plan to restructure the GST regime. The Centre is reportedly examining a simplified two-slab system — 5% and 18% — along with a punitive 40% slab for five to seven “sin goods” categories. These are expected to include tobacco, gutkha and pan masala, and real money online gaming.
During a Supreme Court hearing in the ongoing GST case concerning the gaming sector, the Additional Solicitor General (ASG), in a passing comment, suggested that “real money gaming companies are efficient enough to pay 40% GST” and that the government could classify them under the highest slab.
“This move would be catastrophic, the sector has only just begun adjusting to 28% GST. Jumping to 40% will wipe out small and mid-sized operators, trigger mass layoffs, and stifle innovation. Many companies will have no option but to shut down operations entirely,” a senior executive from a leading gaming platform told Network18’s Storyboard18.
The matter will reportedly be studied by three Groups of Ministers (GoMs), whose recommendations will be presented to the GST Council. The Council is expected to deliberate in September or October, depending on the pace of the review.
The platform quotes gaming and tech lawyer Jat Sayta as having said, “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 principal 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. The correct valuation mechanism for online real money gaming will be also be decided in the Gameskraft case by the Hon’ble Supreme Court where after extensive hearings the apex court has reserved verdict.”
Per Storyboard18, the proposal, if carried through, could also strain investor confidence. Several venture capital firms have already paused fresh funding in Indian gaming companies after the 28% GST decision last year. While the government has yet to officially confirm the decision, analysts warn a further increase could deepen the sector’s liquidity crunch.
Another industry analyst added, “Classifying online gaming alongside tobacco and gutkha is not just economically damaging, it’s also a flawed policy stance. Unlike sin goods, this is a digital entertainment industry that creates jobs and exports talent.”
