Uniform 28 per cent tax on Online Gaming: What the GST Council’s decision says, its implications

  • Recently, the Goods and Services Tax (GST) Council has decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing.
  • The government is now expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament, which will enable inclusion of online gaming and horse racing under actionable claim.
  • The government has maintained that this decision is not intended to end any industry.
    • However, online gaming companies have raised concerns about the impact of this move on the industry, as it is likely to affect volumes and thus the viability of gaming companies.


Illustration representing the GST Council's decision on online gaming, casinos, and horse racing

GST council:

  • A constitutional body responsible for making recommendations on issues related to the implementation of the Goods and Services Tax (GST) in India.
  • According to the first provision of the amended Constitution’s Article 279A, the President is required to establish the GST Council within sixty days of the provision of Article 279A taking effect.
  • Decides key issues related to the GST such as tax rates, exemptions, thresholds, and administrative procedures.
  • Every decision of the GST Council shall be taken by a majority of not less than three-fourths of the weighted votes of the memberss present and voting with a weightage of one-third of the total votes cast to the Centre and a weightage of two-thirds of the total votes cast to the States, promoting the spirit of the co-operative federalism. This approach to decision making is known as the consensus-based approach.


Illustration representing the GST Council's decision on online gaming, casinos, and horse racing

Decision of the GST Council for online gaming, casinos and horse racing

  • The uniform levy of 28 per cent tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing, and on the full value of the bets placed in case of online gaming.
  • Earlier, the ministerial panel on online gaming, casinos, horse-racing had discussed the other option of levying tax on gross gaming revenue or platform fee, that is, the charge paid to avail the gaming services but this did not find favour.
  • The government will bring in amendments to the GST-related laws to include online gaming and horse racing in Schedule III as taxable actionable claims.
    • In the context of GST, an actionable claim is defined as goods under the Central Goods and Services Tax Act, 2017.
    • It is a claim to an unsecured debt or to any beneficial interest in movable property that is not in the claimant’s possession at the time the claim is filed.
    • So far, lottery, betting, and gambling were classified as actionable claims. Now, horse racing and online gaming will be added.

 Size of online gaming market in India

  • It is anticipated that the revenue generated by the mobile gaming industry in India will be greater than $1.5 billion in 2022, and it is anticipated that this number will reach $5 billion in 2025.
  • In comparison, the industry in China expanded at a rate of 8% between 2017 and 2020, while the rate of expansion in the United States was 10%.
  • It is anticipated that it will grow at a compound annual growth rate of 15% to reach 153 billion rupees in revenue by the year 2024.
  • For the past two years in a row, India has had the fastest growing percentage of new paying users (NPUs) in the gaming industry anywhere in the world. This percentage is projected to reach 40% in 2020 and then 50% in 2021.

 Impact of GST Council’s decision

  • The decision has been applied indiscriminately to gaming and gambling platforms.
  • This includes companies that have spent years in lobbying efforts to create a distinction between a game of skill and game of chance, essentially trying to distinguish themselves from gambling platforms.
  • As such, online gaming is perhaps the only segment of the internet economy that has multiple highly profitable companies.

Government’s stand on including new activities under GST:

  • Union Finance Minister Nirmala Sitharaman, who heads the GST Council, said the intent was not to end any industry but rather a “moral question” about taxing both gaming at the same rate as other “essential items”.
  • Government agenda is not to end any industry as all types of businesses have to function but there  was discussion on the moral question of not giving more incentives to them than essential goods and decision is tken with the active participation of sttes.

 Decision by the Group of Ministers (GoM)

  • A Group of Ministers (GoM) was constituted to look into the issues related to taxation on casinos, horse racing and online gaming.
  • The GoM submitted its first report in June 2022
    • In the first report, the GoM had recommended a uniform 28 per cent rate for casinos, race courses and online gaming on the full value of the consideration paid (contest entry fee/bets pooled/ coins purchased etc.).
    • It had also recommended that no distinction should be made for levying GST on the basis of an activity being a game of skill or of chance or both.
    • After Goa raised reservations on the GoM report in June last year, the Council decided for a review of the report.
  • Following this, three meetings of the GoM were conducted last year, and the discussions were around two questions:
    • whether the activities of race course and online gaming amount to betting and gambling or not in the context of various High Court and Supreme Court judgments; and
    •  how should the supplies of casinos, race courses and online gaming be valued — on the full-face value of bets placed or on Gross Gaming Revenue (GGR) (for casinos), totalisator fee (for race courses) and platform fee/GGR (for online gaming).

 Application of the tax

  • At present, most gaming companies were paying a tax of 18 per cent applicable on the platform fees, distinguishing based on the factor of these activities being games of skill such as fantasy gaming platforms.
  • The Revenue Department, however, has maintained that the tax rate on these categories is 28 per cent.
  • However, under the new structure, a GST of 28% will be applicable on the entire face value of the bet or the consideration paid, and not the platform fee.

How does the tax interplay with the IT Ministry’s rules for online gaming companies?

  • In April, the IT Ministry had notified rules for online gaming intermediaries, allowing for the creation of self regulatory bodies that will decide what is a permissible online game.
  • Finance minister  said the GST Council’s decision focused on the taxation part of online gaming and it will align with the regulation of the Ministry of Electronics and Information Technology (MeitY).
  • And tax on online gaming companies would be imposed without making any differentiation based on whether the games required skill or were based on chance, and that there will be an amendment in the GST law to tweak the definition of actionable claim.


  • Decision of GST council to impose uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing is in right direction which shows the balance approach of government for not completely ending these industry on the other hand it creates level playing field for essential goods under GST tax rate vis-i-vis bet or chance based games.