It is often said that the tallest tree feels the axe first; this seems to be the case for one of India’s fastest-growing sectors in online gaming. The Indian government has decided to levy a new and higher rate of GST tax on online gambling, which has led to a significant amount of backlash from stakeholders across the Indian online gaming industry.
The Indian online gaming sector is a veritable powerhouse of economic growth, seeing somewhere in the neighbourhood of 500 million users and being valued at around $2,4 billion in 2024. With so much traffic and so much revenue moving through this industry, the Indian government has decided to levy a harsher Goods and Services Tax (GST) on operators. The new GST of 28% isn’t just larger, it is also calculated differently. Operators, legal experts and other stakeholders are incensed by the changes and have pushed for a Supreme Court review of the new tax rules.
What Specifically Has Changed in the New Rule?
There are a couple of changes in the new GST rules. For one, the tax rate has climbed from the previous 18% rate by 10%, to 28% across the board. Secondly, this new rate is going to apply to the full value of any bets that get placed, whereas the previous rule only applied to commission fees in most cases.
Operators are saying that the combination of these two changes at once is going to cause the operational costs of platforms to double or potentially triple. There are also concerns that while operators that offer no deposit bonuses, as reported by Erik King on Bengaslots, will be affected, it will also impact players, causing a potential reduction in user numbers, further hampering the income of operators.
Surprisingly, these new rules have been in place since October of 2023, so why is this becoming an issue now, in particular, and why is the Supreme Court getting involved?
Why Involve the Supreme Court?
The reason it is in the news cycle and relevant currently, rather than in late 2023, is simply that it takes a long time for matters like this to proceed, and that only recently have there been things to report. As to why the Supreme Court is getting involved, well, there have been numerous legal challenges made against the new GST by online gaming operators and other industry stakeholders. The Supreme Court has now taken up the case and is reviewing a few different elements of the new GST rules.
One of the issues that many operators are raising with the Supreme Court in relation to the new GST is that games of skill are being taxed at the same rate as games of chance, which operators feel is not fair.
Another crucial point that operators are contending with is that companies are being asked to pay the higher rate of tax on previous years’ revenues, despite the rule being in place from October 1st 2023. These operators are claiming that despite claiming a willingness to be fair, the government is continually moving their stance.
Backlash Throughout the Industry
It is a rare moment for an entire industry to stand as one and declaim new regulation, but that is effectively what has been happening in the Indian online gaming industry. As one of the fastest-growing digital markets in India, there is a significant amount of money and investment being put into this industry, and that includes domestic and global stakeholders.
As we said earlier, the Indian online gaming industry has around 500 million unique users and was valued at over $2.4 billion in 2024. This is no small fish to fry, and industry stakeholders claim that with such a harsh GST being levied, a number of unwanted consequences could occur, such as:
- Platforms shutting down. Platforms that are run by small startup companies or designed to service only a small regional area could find operational costs too much to handle under the new system and need to acquire loans to stay operational, or will simply shut down.
- Investors might withdraw. By making it harder to operate platforms successfully, the government is making it less attractive to both domestic and international investors to get involved in the market, with fears that investors will just engage in other activities like forex trading, which will significantly slow market growth.
- Less tax revenue overall. It might seem counterintuitive, but by raising GST on gambling activities and therefore increasing the operational costs of platforms, it is likely that there will be far fewer platforms. This, coupled with the services potentially getting more expensive, will mean that less gambling takes place, which will lead to less revenue gathered.
How Exactly Will Users be Affected?
Sadly, as with many industries, a heavier tax placed on operations is likely to end up landing directly on the heads of consumers. Players should expect platforms to offer smaller winnings, demand higher entry fees or levy additional charges for the pleasure of playing their games at all.
One fear that some operators and industry stakeholders have raised is that as domestic platforms feel the brunt of increased GST pressure and have to lower their levels of service, offshore platforms will poach their customers. These platforms already operate outside of the bounds of regulation, so they will be unaffected by GST. While this could be bad for players, who will be enticed with flashy bonuses to play at potentially less safe platforms, it also means a loss of tax revenue for the government
The Supreme Court Holds the Future of India’s Online Gaming Sector
While the future is uncertain, it is clear that the runaway growth of India’s online gaming industry has come to an impasse. On one side are operators and industry stakeholders claiming that they will be unable to run their platforms at the same level of service and will see losses. On the other hand, the government is standing firm on its stance that these activities are risky and must be taxed.
The decision will, ultimately, rest with the Supreme Court. India’s online gaming industry is likely to continue to grow regardless of the outcome, but that growth may be tempered with a much heavier tax burden than what industry stakeholders deem appropriate.
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