Exclusive: 28% GST a 'death knell' for India's gaming industry, says legal expert
The Supreme Court of India is set to begin final hearings on 5 May in a crucial case, challenging the imposition of a 28 percent Goods and Services Tax (GST) on the full value of bets in the online real-money gaming sector.
The case stems from multiple show-cause notices issued by the Directorate General of GST Intelligence (DGGI) to gaming firms and casinos, involving an alleged tax liability of over ₹1.12 lakh crore ($ 13.5 billion). Platforms such as Dream11, Games24x7, and Head Digital Works have challenged the government’s decision, arguing that GST should apply only to their gross gaming revenue (GGR), not the entire amount staked by users.
The government, on the other hand, maintains that the tax rate has always been applicable and that amendments made in 2023 merely clarified the law.
This case, now in the hands of the Supreme Court for a final decision, could have a big impact on how skill-based games are taxed, how “actionable claims” are defined, and how digital innovation is regulated in India. The top court’s final ruling could completely reshape the way the gaming industry operates and is regulated in the country.
To gain a deeper understanding of the issue, 8gfg.shop spoke with , a corporate, commercial, and tax law firm based in New Delhi. In this exclusive interview, Kotni shares his legal insights into the GST valuation dispute, the distinction between skill-based and chance-based games, and the broader policy implications of the ongoing litigation.
8gfg.shop: How has the 28 percent GST impacted the online gaming industry in India?
Srinivas Kotni, Founder and Managing Partner of Lexport: The 28 percent GST rate which seems to be a moral policing by the government had in effect blocked any investment into the gaming industry in India—online or otherwise. Unless and until the government looks at it more from an industry perspective and if there are any moral questions, they should ban it completely…but to have tariff barriers may not be right.
I’m also concerned not only about the rate of tax but also the valuation. Valuation is a bigger killer than the rate itself because normally any kind of GST or service tax the world over is paid on the platform fees, etc., and it never impacts the sweepstakes.
So imposing this tax on the gross receivables just demotivates the players from playing on any platform that operates from India or which attracts Indian taxation.
8gfg.shop: Why is reduction in the 28 percent on gaming earnings considered unlikely?
Kotni: It is because the same government has imposed it. It was not there before 2023. So, the same government is at the helm of affairs in India. Therefore from that perspective, since it’s a personal choice to impose tariff restrictions and also to make it difficult by putting a difficult valuation, I don’t think it’s in the offing.
Even, if at all, people are saying it…it may be rumors only. There’s no concrete thing coming from the stable of the government.
8gfg.shop: What do you think is the implication of the tax policy for India’s competitiveness in the global market?
Kotni:As far as service providers are concerned from India, including game developers and others who entered the industry when the times were better, they remain because India has huge brain power and they have figured out the entire gaming industry, online gaming, e-sports, even physical gaming, etc.
So that contribution will be there but because of these barriers, no new entrant would come to India. And even for people who want to get into the gaming industry as different stakeholders, it is demotivating for them to enter the industry right now.
8gfg.shop: Has the industry proposed any changes to the GST framework? If so, what kind of suggestions?
Kotni: Many representations have been filed with the government…many of the industry players like the All India Gaming Federation (AIGF), are going to the government as an association with a request to be more considerate about both the rate of tax and also the base for the tax…but then I don’t think there is any movement on those representations, probably they are seeing the waste paper basket in the corridors of revenue ministry.
8gfg.shop: What kind of reforms is the industry expecting from the government regarding this taxation?
Kotni:In terms of taxation, I don’t see anything in the offing right now…but otherwise also as far as the regulatory environment is concerned…there were amendments to the intermediary guidelines under the Information Technology Act but relating to vetting of online games by independent approvals board and also the KYC requirements and all that, as far as I understand, there is no notification of those provisions.
I think India needs a comprehensive gaming law which covers all aspects. How the platforms will operate…there may be a central regulatory authority, there may be KYC requirements so that consumers are also protected…government revenue is also protected and the kind of grey market in which the gaming industry is stuck right now, there has to be some release.
That is possible only when the regulatory environment is clear and the taxation is also moderate and clear. So the government should, in my view, work on both things and it has to compete with the outside world.
It is a huge industry that provides employment and provides different avenues for people to engage themselves productively and profitably in.
So it should be seen from that perspective.
8gfg.shop: Are KYC and a gambling regulatory body enough to reform India’s gaming landscape, or are other factors also needed?
Kotni: Look…for example, there is an age-old law—the Public Gambling Act. Any kind of gambling or betting was regulated by that act and it purely prohibited gaming except in states that had allowed it.
For instance, Tamil Nadu is a very strict state concerning gaming whereas Goa allows some relaxation—at least for visitors or tourists who come to Goa and want to have a good time. For them, there is a more liberal policy.
So, all aspects concerning the gaming industry, whether physical gaming, online gaming, or e-sports, need to be brought under one single piece of legislation and one regulator.
It must be given the status of an industry…only then can it survive and enable India to become a formidable player in the global gaming arena.
8gfg.shop: How does India’s gaming tax structure compare to international models, and is this effectively double taxation when players withdraw winnings?
Kotni: I just checked…Sri Lanka has 18 percent GST and even that is not levied on the gross amount like it is in India. Similarly, across the world, taxation is moderate.
You can’t have a double whammy like we have here in India which serves as a complete death knell for the industry. In my observation, the global approach is far more liberal compared to India.
As far as winnings are concerned, no GST is applied when they are withdrawn. That’s considered income for the player and it falls under income tax. So yes, there are two separate taxes involved…one is the indirect tax…28 percent GST charged when a player enters a game and contributes money towards playing. This is calculated on the gross amount and goes directly to the government exchequer.
Then, if someone wins a sweepstake, the winnings are subject to income tax. But I’m sure there is no additional tax on the 28 percent GST…it’s treated as an expense for the players.
8gfg.shop: If the GST framework is not revised, do you think more gaming companies will move to offshore locations?
Kotni: It already has. Many people have moved to countries like Sri Lanka while Singapore is a little stricter. Many service providers have moved to Dubai and East European countries like Estonia. Millions of people are engaged in this industry and India is a highly populous country.
We need to look for some kind of employment and avocation…and when there is an easy way out, people will take it. Of course, it has to be self-regulated, and it must be ethical gaming.
There can be some standards that can be set in terms of whatever policy is decided by the government…but to create hurdles…tariff and non-tariff…is not going to help the population because we are a highly populous country.
8gfg.shop: If the Supreme Court ultimately rules against the government’s taxation policy, will companies be eligible for a refund on the excessive GST paid?
Kotni: In my view, the Supreme Court would not interfere with the government’s taxation policy because it is fundamentally a policy matter. It is the prerogative of the Parliament and the government to impose any amount of tax they wish. I also don’t see any precedent where the Supreme Court has intervened in taxation rates. At most, it may offer an observation or some advice, but I don’t expect any ruling in this regard.
