Gaming
Unlocking the impact of the 28-cent GST levy on online gaming, horse racing, and casino activities
Mumbai: In recent developments, the GST Council, a body responsible for making crucial decisions regarding India’s Goods and Services Tax regime has made a significant announcement, reshaping the landscape of taxation in India. The council’s decision to impose a 28 per cent Goods and Services Tax (GST) levy on the entire value of online gaming, horse racing, and casino activities has sent ripples through various industries. This move has far-reaching implications, not only for businesses involved in these activities but also for the broader economy. In this article, we delve into the intricacies of this tax revision, exploring its implications and potential consequences for the gaming and entertainment sectors.
Before the implementation of GST, the taxation and regulatory landscape for online gaming, horse racing, and casino activities in India was marked by a lack of uniformity and consistency. Different states had different rules and tax rates, creating challenges for businesses operating in these sectors. The introduction of GST aimed to bring about a more standardized and streamlined taxation system for these industries across the country.
Potential Implications for Consumers
As these industries adjust to the new GST levy, consumers may also feel the impact. The 28 per cent tax rate could lead to higher costs for online gaming, horse racing bets, and casino visits. This may prompt some consumers to reconsider their entertainment choices or allocate their budgets differently. While it may pose challenges for businesses and consumers, it’s essential to adapt and navigate these changes effectively.
Here are some views on the topic by industry experts…
Edited excerpts
Skyesports founder and CEOShiva Nandy:
“The 28 per cent GST on online gaming only applies to real-money gaming in which players pay money to participate. As India’s leading esports tournament organizer with a goal of elevating esports from the grassroots, all our competitions are open with no entry fee. Thus, the new GST laws don’t apply to us and make no difference in our operations.”
Revenant Esports founder and CEO Rohit Jagasia:
“Only a year ago with the bans on Free Fire and BGMI, the Indian esports scenario was struggling with a dearth of options for mobile gamers. I applaud Garena in their efforts to bring Free Fire India and already make a commitment towards esports which will be a big boost to welcoming old and new players alike. While we don’t currently have an esports roster in the game, we are always on the lookout for potential titles to enter and Free Fire is certainly one on our radar.”
Esports Federation of India (ESFI) president & acting director general of the Olympic Council of Asia Vinod Tiwari
“It is imperative first to understand that the 28 per cent GST is going to be applicable to the iGaming sector, including Real Money Gaming (RMG), fantasy sports, teen patti, rummy, and poker which are categorised under gambling or betting in the rest of the world. Contrary to some media reports, this GST is neither applicable nor will it have any impact on the ‘Video Games’ or the Esports industry.”
“Esports has been officially recognised as a sport by the government which finally and thankfully distinguishes it from any and all activities like iGaming such as fantasy, teen patti, rummy, poker, betting, and gambling, among others. It will carry on to be taxed the way it always has been. Theories of ‘game of skill’ and ‘game of chance’ which only exist in our country neither apply nor are relevant in the Esports ecosystem,” said Tiwari.
E-Gaming Federation secretary Malay Kumar Shukla:
“This is an extremely unfortunate decision as charging a 28 per cent tax on full face value will lead to a nearly 1000 per cent increase in taxation and prove catastrophic for the industry. A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry’s image and capacity to survive. It is in addition to the loss of employment opportunities and the huge impact on marquee investors who are heavily invested in this sunrise sector. Furthermore, online gaming is different from gambling, and the Supreme Court and various High Court decisions have reaffirmed the status of online skill-based games as legitimate business activity protected as a fundamental right under the Indian constitution. While the industry was quite optimistic with the new developments including amendments to the IT rules and implementation of TDS on net winnings, all this will be moot if the industry is not supported by a progressive GST regime. We will wait for further details to assess the situation and evaluate our approach.”
PlayerzPot co-founder & director Mitesh Gangar:
“The GST council’s decision to levy 28 per cent GST on total face value on online gaming will corner the gaming industry in a big way. The overall operations will not be feasible. The high tax burden will completely restrict the cash flow, limiting a company’s ability to invest in research, innovation, expansion or survival. The higher burden will also put a blocker on India’s massive gaming industry and deter new players from entering the industry. The rising gaming economy will take a big hit and trigger economic stress, restrict job creation and curtail economic growth within the sector.”
Qlan co-founder and CEO Sagar Nair:
“The decision of the GST council to impose a 28 per cent tax will have a significant impact on the online gaming industry, which unfortunately includes the Esports community. While we understand that the government needs to impose such measures on casinos, horse racing, and gambling, the higher tax rate is not justified for the competitive gaming community. It can discourage new players from entering the market as their hard-earned earnings generated through their efforts just like mainstream athletes will be taxed on the same level as those involved in gambling and other such practices. For the Esports industry to continue its unprecedented growth and recognition on the international stage, it is vital for the government to treat Esports as a separate category with reasonable tax rates that would support the development of the sector.”
Alpha Zegus founder & director Rohit Agarwal:
“Yet again, esports being included in the same domain as online gaming, horse racing, and casino, has put our industry at a major disadvantage. While the government might have fair reasons to impose higher GST on horse racing and casino winnings, imposing the same rules on an industry like esports doesn’t seem fair. Esports does not only have a ‘win or lose’ situation based on luck but also has a very big element of skill that determines the outcome of the game. This is not what I expected, and our fight to separate esports from other labels still continues.”
IndiaPlays COO Aaditya Shah:
“The GST council’s recent stance is both surprising and disappointing. Despite the government’s previous positive steps and clarifications regarding the skill-based gaming industry, such as clarification about TDS on winnings and establishing self-regulatory bodies, this new decision contradicts and undermines those efforts. As of 2022, the revenue generated by the Indian online gaming industry has already surpassed $2.8 billion, and it is projected to reach $5 billion by 2025, indicating an annual growth rate of 28-30 per cent. The number of gamers in India currently stands at 420 million, and this figure is expected to experience exponential growth by 2025. Additionally, there are approximately over 1,300 gaming startups in India, highlighting the industry’s potential for unlocking further growth. However, imposing a 28 per cent GST on anything other than our gross revenue will have adverse consequences. It would be highly unjust to burden the industry with such a significant tax. Not only would this decision impede the industry’s progress, but it would also put millions of jobs at risk.”
AIGF Spokesperson said,
“A vast majority of online gaming companies fall within the MSME sector. With over 400 per cent increase in GST liability under the new tax regime, many entrepreneurs who had innovated in the sector would be disproportionately impacted with companies paying more in taxes than they would be generating in revenue. Since the decision, some companies have announced their closure or wide spread layoffs and we believe this trend will only increase in the coming months. While the decision might have been undertaken with a view to increase revenues to the exchequer, its impact might in fact see a fall in revenues as well as company valuations.”
Gaming
India’s new online gaming rules take effect today, banning money games and creating a regulator
The rules, in force from today, separate e-sports from gambling and impose jail terms and stiff fines on violators
NEW DELHI: India’s online gaming sector woke up this morning to a new reality. The Promotion and Regulation of Online Gaming Rules, 2026, came into force today, May 1st, turning a year of legislative intent into enforceable law. The message from New Delhi is blunt: e-sports and social games are welcome; online money games are not.
The rules operationalise the Promotion and Regulation of Online Gaming (PROG) Act, passed by Parliament in August 2025. Together, they represent the most sweeping regulatory intervention India has made in its booming digital gaming market, one that generated Rs 23,200 crore in 2024 and is projected to grow at a compound annual rate of 11 per cent to reach Rs 31,600 crore by 2027. The stakes, in every sense, could not be higher.
A sector out of control
The urgency behind the legislation is not hard to find. An estimated 45 crore Indians have been affected by online money gaming platforms, with losses exceeding Rs 20,000 crore. Addiction, financial ruin, money laundering, and suicides have all been linked to the sector. Seventy-seven per cent of the market’s revenues came from transaction-based games, a figure that made regulators deeply uneasy.
The government’s response, effective as of today, is categorical. Online money games, whether based on chance, skill, or any mix of the two, are banned outright. So is their advertising, promotion, and facilitation. Banks and payment processors are barred from handling related transactions. Unlawful platforms can be blocked under the Information
Technology Act, 2000.
The penalties are designed to sting. Offering or facilitating online money games can attract up to three years in jail and a fine of up to Rs 1 crore, or both. Repeat offenders face a minimum of three years, extendable to five, with fines between Rs 1 crore and Rs 2 crore. Advertising such games carries up to two years in prison and fines of up to Rs 50 lakh, with repeat violations attracting higher penalties still. Cyber cell officers at state and union territory levels, including at police station, district, and commissionerate levels, are empowered to investigate offences.
The new sheriff in town
At the centre of the new framework sits the Online Gaming Authority of India, a digital-first regulator constituted as an attached office of the Ministry of Electronics and Information Technology, headquartered in Delhi. It is chaired by the additional secretary of MeitY and includes joint secretary-level representation from home affairs, finance, information and broadcasting, youth affairs and sports, and law and justice, a deliberately multi-sectoral design built for a complex sector.
The authority’s powers are broad. It will maintain and publish lists of online money games, investigate complaints, issue directions, orders, and codes of practice, hear appeals on user grievances, and coordinate with financial institutions and law enforcement to ensure effective and timely action.
Its decisions on game classification are to be completed within 90 days, a time-bound commitment that industry players have welcomed after years of regulatory ambiguity. Classification can be triggered by the authority acting on its own initiative, by an application from a service provider, or by a notification from the central government. Games will be assessed on objective factors: whether stakes are involved, whether players expect monetary winnings, the revenue model, and whether in-game assets can be monetised outside the game. The outcome is recorded in a determination order specific to the game and provider.
E-sports gets its moment
While the crackdown on money gaming dominates today’s headlines, the rules also carve out a structured path for e-sports and online social games. Registration, required when notified by the central government, applies to all games offered as e-sports and is based on factors including risk to users, scale, financial transactions, and country of origin. A successful application yields a digital certificate of registration with a unique number, valid for up to ten years. Service providers must display registration details, designate a point of contact, comply with data retention requirements, and follow directions on facilitating payments.
Online money games are explicitly ineligible for recognition or registration as e-sports under the National Sports Governance Act, 2025. The separation is deliberate, and the industry has noticed.
Akshat Rathee, co-founder and managing director of NODWIN Gaming, called today’s operationalisation “encouraging,” pointing to publisher-led registration of esports titles and a time-bound determination process as creating “much-needed certainty for all stakeholders.” He added that the “continued emphasis on clearly separating esports from online money gaming is critical in preserving the integrity of competitive gaming as a skill-driven discipline.” He described it as “a proud moment to see official acknowledgement of the broader benefits of responsible esports and gaming, from building confidence, discipline, and teamwork to creating new career pathways for young talent,” and said the framework sets “a strong foundation for the ecosystem to scale in a more structured and globally competitive manner.”
Animesh Agarwal, co-founder and chief executive of S8UL, was equally bullish. “This clarity is critical in unlocking investor confidence and attracting multi-genre brands, while also enabling organisations to take a more long-term view, whether in investing in talent, scaling teams, or building globally competitive formats,” he said, adding that it “strengthens trust among audiences and mainstream stakeholders, positioning esports not just as a sport, but as a fast-growing youth entertainment category in India.”
But Agarwal urged caution on several fronts. There remains limited clarity around financial frameworks, particularly in how esports earnings are treated by banks and financial institutions. A well-defined pathway for the formal recognition or registration of esports teams is still evolving, as are structured player protections. He also called for smoother visa processes for esports athletes competing in international tournaments and for government support in developing infrastructure, including bootcamps, training facilities, and access to high-performance equipment across titles.
Vishal Parekh, chief operating officer of CyberPowerPC India, pointed to downstream effects on education and careers. “With formal recognition and policy backing, colleges and institutions are more likely to take the sector seriously, whether through dedicated esports infrastructure, training programmes, or curriculum integration,” he said, adding that this helps students view gaming as a viable career spanning roles across competitive play, content, game development, and allied industries. He noted that as esports gains prominence in global multi-sport events, the framework strengthens India’s position in international competitive gaming, and called on the ecosystem to provide the right infrastructure and access to high-performance hardware to unlock opportunities in talent development and job creation.
Protecting users, one safeguard at a time
The rules introduce a layered system of user protections calibrated to the risk profile of each game. These include age verification, age gating, time restrictions, parental controls, user reporting tools, counselling support, and fair-play and integrity monitoring. Service providers must disclose their safety features and internal grievance mechanisms when applying for determination or registration.
A two-tier grievance redressal system sits atop these safeguards. Users who are dissatisfied with a platform’s resolution can escalate to the authority within 30 days. The authority aims to dispose of such appeals within a further 30 days. A second appeal lies before the secretary of MeitY, who must also endeavour to resolve matters within 30 days. Enforcement proceedings will be conducted in digital mode wherever possible, with cases targeted for resolution within 90 days from receipt of a complaint.
Penalties under the framework are proportionate, taking into account gain from non-compliance, loss to users, the gravity of the offence, and whether violations are recurring. Mitigation efforts by service providers will also be considered when determining penalties. All penalties imposed under the Act will be credited to the Consolidated Fund of India.
The money follows the rules
For investors and founders, the implications are immediate and significant. Sagar Nair, head of incubation at LVL Zero Incubator, a 100-day sprint designed to accelerate early-stage gaming startups across India, argues that with real-money gaming now prohibited, capital will shift “away from transaction-driven models toward content-led, IP-driven, and global-first gaming businesses.” He acknowledged trade-offs: for operators with exposure to real-money formats, the market becomes more restrictive in the near term. But he argued that by clearly separating esports and non-money gaming from online money gaming, “India is positioning itself as a hub for responsible, creative, and scalable game development.” The opportunity, he said, is “to view India not just as a monetisation-first market, but as a talent, IP, and scale market,” adding that “for founders and investors willing to adapt, this shift could ultimately strengthen India’s position in the global gaming landscape.”
The government frames the wider impact in equally ambitious terms: a boost to India’s creative economy and digital exports, new career pathways for young people, protection for families from predatory platforms, and a stronger voice in global digital governance. India, it argues, offers a model for other countries grappling with the same tensions between gaming’s economic promise and its social risks, one that shows innovation and strong safeguards need not be mutually exclusive.
Whether the framework delivers on those promises will depend on enforcement, always the hardest part. But from today, the architecture is firmly in place: a regulator with teeth, a classification system with deadlines, penalties designed to deter, and a clear dividing line between games that build careers and games that destroy finances. For a sector that has grown fast and governed itself loosely, May 1st, 2026 is the day the free ride ends.
