New GST implications on online gaming industry- India

December 20, 2022
Online Gaming Industry

By Rupin Chopra and Apalka Bareja

The Directorate General of GST Intelligence (DGGI) has issued a INR 21,000 crore show-cause notice to the Karnataka based online gaming company, Gameskraft Technologies Private Limited on the pretext of not depositing GST for the period between 2017 and June 2022. Amidst the Gameskarft controversy, the GST Council has constituted a panel of Group of Ministers to examine and formulate a revised GST tax structure for online gaming industry. The panel has recommended certain changes in the rate of GST to be made applicable on online games along with the incidence of levy of GST on online games which has attracted strong opposition from online gaming operators.

Taxation regime on online gaming industry hovers around the confusion and lack of clarity on the classification games on the basis of ‘skill’ and ‘chance’ along with the involvement of real money in these online games.

GST regime for Online Gaming

The current GST regime differentiates between online games based on skills and chance.

A game of skill is one where the outcome is based on the expertise, practice and experience of the player and not merely on chance. These games attract a comparatively lower tax rate. A GST charge of 18% is made applicable under HSN 998439 only on the platform commission or on gross gaming revenue.[1]

Games of chance are treated similar to betting, gambling and horse racing and hence, are subject to Rule 31A of the Central Goods and Services Tax Rules, 2018 thereby attracting higher GST rate. A 28% GST is chargeable under the HSN 999692 on the total bet value.[2]

The line between the games of skill and chance is thin making it difficult to differentiate between the two. One such example is the case of Gameskraft Technologies. However, the tax authorities have decided to club the two categories of games in to one, that is, games of chance, thereby inviting higher GST rate of 28%.

Proposed changes in the tax regime for online gaming

Following are the recommendations proposed by the panel of GoM:[3]

  • A flat GST rate of 28% to be made applicable on all online games, including games of skills and chance. The rate will be chargeable on ‘gross revenue’ basis that is, on the total stake value and not on the platform fee paid by the user.
  • A flat rate of 28% to be made applicable on casinos as well on the total value of chips bought at the time of entry. Furthermore, no GST would be applied on the multiple round earnings or bets made with earnings from previous rounds.

In 47th GST Council Meeting the Council has directed the GoM to re-examine the issues based on casino, race course and online gaming based on further inputs  from States and submit the report in short duration.[4]


The increase in GST tax rate from 18% to 28% is likely to impact the operations of online gaming companies. The cost per game for players will also increase by three to four times due to which the ability to play games per user could decrease significantly thereby, directly impacting the online gaming companies. The proposal to increase GST rate is significant as it comes in response to increased revenue receipts from online games and the growing market share of online gaming industry.

[1] Report on GST on online skill-based gaming, August 2022 by ASSOCHAM and EY.

[2] Report on GST on online skill-based gaming, August 2022 by ASSOCHAM and EY.

[3] https://cleart-on-online-gaming/


Rachita Thakur, Intern at S.S. Rana & Co. has assisted in the research of this article.

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