With the Government proposing to overhaul the GST regime with a special rate of 40 per cent on “sin and demerit goods”, the top slab is likely to see the inclusion of pan masala, tobacco, cigarettes, luxury cars, SUVs — and online gaming.
According to sources, the Department of Revenue has kept in mind the country’s “social ethos” while tagging goods and services in the “sin and demerit” category, and online gaming is seen to be fitting that definition.
If this move is finalised, it is likely to cause an upheaval among online gaming companies, ranging from fantasy sports and real gaming platforms, which have previously complained of the 28 per cent GST levied on them.
The latest consideration also comes amid growing concerns within the Central and state governments over the amount of money being spent on these platforms, and the ease with which these companies enable automatic deductions for payments, sometimes without consent, during consecutive rounds of a game.
The 40 per cent rate, which is likely to be recommended by the GST Council, could also benefit the Central and state governments fiscally, with substantial revenue gains expected.
The sector has shown fairly inelastic demand previously, when the GST rate was set at 28 per cent from October 1, 2023. Prior to that, many online gaming companies were not paying 28 per cent saying there were differential tax rates for games of skill and games of chance.
Official data shows GST revenues jumped sharply after the Council’s decision in July 2023 to impose a uniform 28 per cent levy on online gaming, horse racing and casinos with effect from October 1, 2023.
Story continues below this ad
Union Finance Minister Nirmala Sitharaman had said last September that revenue from online gaming “increased by 412 per cent and reached Rs 6,909 crore in just six months… from Rs 1,349 crore before the notification issued on online gaming”. For casinos, she had said the revenue increased by 30 per cent, from Rs 164.6 crore in the six months prior to the decision to Rs 214 crore in the same period after the move.
The need for a higher GST rate for online gaming may also find support among policymakers as they have been raising concerns over the amount of time being spent by users on these platforms that is resulting in them spending increasingly high amounts of money on such activities.
Reason: Time & money
A key consideration behind the move is concerns among policymakers over the time and increasingly higher amounts of money being spent by domestic users on online gaming platforms.
The domestic spend on online games is not “particularly small”, Chief Economic Advisor V Anantha Nageswaran had said on August 14, days after the National Payments Corporation of India (NPCI) for the first time released monthly data breaking up payments made to various categories of merchants via the Unified Payments Interface (UPI). As per the data, UPI payments on digital games averaged more than Rs 10,000 crore in the first four months of 2025-26.
“…take a look at how much Indians are spending on online gaming every month. And the number isn’t particularly small — it is Rs 10,000 crore per month. That’s Rs 1.2 trillion (in a year),” Nageswaran said at a meeting with statistical advisers in various ministries and departments, organised by the Ministry of Statistics and Programme Implementation.
Story continues below this ad
The Indian Express had earlier reported that the Centre is also finalising a move that could bring online real-money gaming companies under the ambit of anti-money laundering laws and subject them to stricter obligations, such as know-your-customer (KYC) requirements, and tracking and reporting suspicious transactions.
According to a report by FICCI and EY from March 2025, online gaming companies in India collectively earned a revenue of close to $2.7 billion in 2024. These companies typically make money by taking a cut from a user’s winnings. As per the report, more than 155 million Indians engaged with real money gaming sub-segments such as fantasy sports, rummy, poker and other transaction-based games in 2024, marking a 10 per cent increase over 2023. On an average, around 110 million people played these games daily.
.