GST on Online Gaming, Casinos and Horse Racing

GST on online gaming has always been a contentious issue in the industry. At present, online games attract 28% GST on the full face value. With the Promotion and Regulation of Online Gaming Act coming into force in August 2025, the face of taxation under GST is changing. Understand these developments and whether to tax online games under GST, if yes, how and what the tax on online games will be. 

Key takeaways-

• Uniform 28% GST applies on the full face value of bets for all online games (skill or chance) until 21st August 2025.
• However, online money gaming has been banned from 22nd August 2025, removing GST applicability where no monetary consideration is involved.
• e-Sports and educational games attract 18% GST on platform fees or service commissions, distinguishing them from real-money games under the current GST regime.
• The GST Council is expected to clarify GST rates further in the 56th GST Council meeting, particularly for platform fees in non-money gaming and emerging gaming categories.

What is GST on Online Gaming?

Online gaming is subject to GST as it is considered a supply of services. These are included in the exceptions of Schedule III of the CGST Act to be taxable actionable claims. Online gaming can be of two types. Game of skill and game of chance. 

A game of skill is one where the outcome is dependent on the expertise, practice, and experience of the player and not merely on chance. Whereas games of chance are treated similarly to betting, gambling, and horse racing.

The government has banned online money gaming in India since 22nd August 2025 with the passing of the Promotion and Regulation of Online Gaming Act, 2025. Ever since, GST will not apply where there is no monetary consideration involved in online gaming. However, if a platform fee or service fee is charged, the GST Council must clarify whether a higher or lower GST applies to it.

GST Rates on Online Gaming

GST Rate on Online Skill Games

GST rate of 28% applies to online games on the full value of the bets placed, whether it is a game of chance or skill. However, with the Online Gaming law officially coming into force from 22nd August 2025, it bans any online money gaming. In other words, money-based games are illegal in India and not allowed to operate. 

With no monetary consideration involved in online gaming, it will not attract GST. However, if any platform commission/service fee is collected, it is to be seen if a higher 28% or a lower GST rate would apply for online gaming. e-Sports and online educational games attract 18% GST on the platform fee/service fee/commission collected. We expect this to be clarified by the GST Council in the upcoming 56th GST Council meeting.

The table below shows the HSN code and changes in GST rate on online gaming with timelines for applicability-

GST Rate on Casinos

Playing is casinos attract a 28% GST rate on the face value of the chips purchased.

GST Rate on Lottery

Lotteries are considered goods and not services. GST on lottery is 28% when authorised by the State Government. However, it attracts 12% GST on lotteries run by the State Government. For more information, read our article on Taxation of Distribution of Lottery Tickets under GST.

From the developments seen on 15th August 2025, the government has indicated that lotteries might attract a higher GST of 40% in the upcoming 56th GST Council meeting.

Compliance Requirements for Online Gaming

Every person supplying online money gaming from a place outside India to a person in India must mandatorily obtain GST registration. For the rest, threshold limits would apply for GST registration.

As per Section 16(1) of the CGST Act, a registered tax person can avail input tax credit (ITC) on goods and services used in furthering the business. However, Section 17(5) of the CGST Act imposes some restrictions on when ITC cannot be claimed.

How to Calculate GST on Online Gaming?

Until 21st August, 2025, the GST on online gaming was calculated as given below-

Suppose a player places an online bet of Rs.10,000 on a fantasy sports platform (which is treated as an online gaming service under GST).

Full face value of the bet = Rs.10,000

GST rate applicable = 28%

GST amount = 28% of Rs.10,000 = Rs.2,800

Total amount liable by player (Bet + GST) = Rs.10,000 + Rs.2,800 = Rs.12,800

Therefore, the platform must charge the player Rs.12,800 in total. The platform must collect and pay GST of Rs.2,800 to the government.

If the platform wins and pays out a prize money of Rs.50,000 to the player, it does not attract GST since it is considered a winning amount and not a supply.

Since online money gaming has been banned since 22nd August 2025, no GST applies without monetary consideration.

Impact of GST on the Online Gaming Sector

Impact of GST on the online gaming sector in India is summarised below-

1. 28% GST on the full face value applied to real-money online games until the ban on such online money gaming. It significantly increased tax liability for gaming platforms.
2. 400% is the surge of government revenue from online gaming following the GST implementation.
3. Higher tax burdens have squeezed gaming operators' margins, causing challenges for startups and affecting prize pools.
4. 18% GST continues to apply to any platform fee charged for playing on e-Sports and social gaming platforms, distinguishing them from real-money games.
5. The ‘Online Gaming Act, 2025’ bans real-money gaming, further impacting GST collections and shifting the focus to e-sports and regulatory oversight.
    

Challenges and Opportunities for Online Gaming

The following points highlight the key current dynamics for online gaming in 2025-

• Regulatory changes and bans on real-money gaming create legal uncertainty.
• High taxes impact profitability but push sector formalisation.
• A growing gamer base and internet access boosts market potential.
• Innovation in e-sports and social gaming offers new revenue streams.
• Clear regulations and enforcement can support sustainable growth.