Understanding Goods and Services Tax on Online Gaming, Casinos, and Horse Racing
The Indian online gaming sector is undergoing significant changes concerning Goods and Services Tax (GST) as the Promotion and Regulation of Online Gaming Act, 2025, bans online money gaming. While a 28% GST previously applied to the full face value of bets on all online games, non-monetary games will no longer attract GST from August 22, 2025. E-sports and educational games continue to be taxed at 18% on platform fees. The GST Council is expected to clarify rates for platform fees in non-money gaming and emerging categories, impacting compliance and revenue within the evolving landscape.
Understanding Goods and Services Tax on Online Gaming, Casinos, and Horse Racing
The application of Goods and Services Tax (GST) to online gaming has been a subject of ongoing debate within the sector. Currently, online games are subject to a 28% GST levied on the entire bet value. Significant changes to this taxation approach are anticipated with the enforcement of the Promotion and Regulation of Online Gaming Act in August 2025. This article explores these developments, outlining when and how online games will be taxed under GST.
What is GST on Online Gaming?
Online gaming services are subject to GST because they are classified as a supply of services. These services are specifically included in the exceptions listed under Schedule III of the CGST Act, making them taxable actionable claims. Online gaming generally falls into two categories: games of skill and games of chance.
A game of skill's outcome depends on a player's expertise, practice, and experience, rather than pure randomness. In contrast, games of chance are treated similarly to activities like betting, gambling, and horse racing.
With the enactment of the Promotion and Regulation of Online Gaming Act, 2025, online money gaming has been prohibited in India since August 22, 2025. Consequently, GST will no longer apply where online gaming does not involve monetary exchange. However, if a platform charges a service or platform fee, the GST Council is expected to clarify the applicable GST rate.
GST Rates on Online Gaming
GST Rate on Online Skill Games
A 28% GST rate is applied to online games based on the full value of bets placed, irrespective of whether they are games of chance or skill. However, with the Online Gaming Law becoming effective from August 22, 2025, online money gaming has been banned, rendering money-based games illegal in India.
When no monetary consideration is involved in online gaming, GST will not be levied. If, however, a platform commission or service fee is collected, the question of whether a higher 28% or a lower GST rate applies remains to be clarified. For e-Sports and online educational games, an 18% GST is currently charged on the platform fee, service fee, or commission. The GST Council is anticipated to provide further clarification on this matter during the upcoming 56th GST Council meeting.
The table below outlines the HSN code and the evolution of GST rates on online gaming, along with their applicability timelines:
| Description | HSN Code | Value of Supply for GST Charge | GST Rate | Applicability |
|---|---|---|---|---|
| Online money games | – | – | Banned, so no GST if no monetary transactions | With effect from 22nd August 2025 |
| All online games, whether a game of skill or chance | – | Full face value of bets placed | 28% | 1st October 2023 until 21st August 2025 |
| Other than online money games, like e-sports or educational games | – | Platform fee/service fee | 18% Note: The GST Council needs to clarify the GST rate at the 56th GST Council meeting | 1st October 2023 onwards |
| Online game of chance/online betting/online gambling | 999692 | Full face value | 28% | Until 30th September 2023 |
| Online game of skills such as puzzles, and some card games, educational games, and e-sports | 998439 | Platform’s commission/service fee or on gross gaming revenue (total stake value – distributed winnings). | 18% | Until 30th September 2023 |
GST Rate on Casinos
Participation in casinos is subject to a 28% GST rate, calculated on the face value of the chips purchased.
GST Rate on Lottery
Lotteries are classified as goods rather than services. State government-authorized lotteries attract a 28% GST. However, lotteries operated directly by state governments are subject to a 12% GST. For additional details, refer to our article on Taxation of Distribution of Lottery Tickets under GST.
As of August 15, 2025, the government has indicated a potential increase in GST for lotteries to 40% in the forthcoming 56th GST Council meeting.
Compliance Requirements for Online Gaming
Any individual or entity providing online money gaming services from outside India to a recipient within India is legally required to obtain GST registration. For other cases, standard threshold limits for GST registration apply.
Under Section 16(1) of the CGST Act, registered taxpayers can claim Input Tax Credit (ITC) for goods and services utilized in their business operations. However, Section 17(5) of the CGST Act specifies certain restrictions, outlining instances where ITC cannot be claimed.
How to Calculate GST on Online Gaming?
Until August 21, 2025, GST on online gaming was calculated as follows:
Consider a player who places an online bet of Rs.10,000 on a fantasy sports platform, which is categorized as an online gaming service under GST.
- Full face value of the bet = Rs.10,000
- Applicable GST rate = 28%
- GST amount = 28% of Rs.10,000 = Rs.2,800
- Total amount payable by player (Bet + GST) = Rs.10,000 + Rs.2,800 = Rs.12,800
Consequently, the platform was obligated to charge the player Rs.12,800 in total and remit Rs.2,800 as GST to the government. If the platform paid a prize of Rs.50,000 to the player, this winning amount was not subject to GST as it was not considered a supply.
Since online money gaming was banned from August 22, 2025, no GST applies in situations where no monetary consideration is involved.
Impact of GST on the Online Gaming Sector
The Goods and Services Tax has had several key effects on India's online gaming sector:
- Increased Tax Liability: A 28% GST on the full face value applied to real-money online games until their subsequent ban. This significantly escalated tax obligations for gaming platforms.
- Government Revenue Surge: Following GST implementation, government revenue from online gaming saw a substantial 400% increase.
- Operator Margin Squeeze: Higher tax burdens have compressed the profit margins of gaming operators, presenting challenges for new startups and impacting prize pools.
- Differentiated Taxation: An 18% GST continues to be applied to platform fees charged for e-Sports and social gaming, setting these apart from real-money games.
- Regulatory Shift: The 'Online Gaming Act, 2025,' by prohibiting real-money gaming, further influences GST collections and redirects attention toward e-sports and regulatory oversight.
Challenges and Opportunities for Online Gaming
Key dynamics for the online gaming sector in 2025 include:
- Legal Uncertainty: Regulatory changes and bans on real-money gaming introduce legal ambiguities.
- Profitability vs. Formalization: While high taxes affect profitability, they also drive the sector towards greater formalization.
- Market Growth Potential: A growing user base and increasing internet penetration contribute to significant market potential.
- New Revenue Streams: Innovations in e-sports and social gaming offer fresh avenues for generating income.
- Sustainable Development: Clear regulations and effective enforcement are crucial for fostering sustained growth.