The government’s proposed restructuring of the Goods and Services Tax (GST) framework could bring online gaming into the highest tax bracket, alongside items such as pan masala, tobacco, cigarettes, luxury cars, and SUVs. 

According to sources, the Department of Revenue is considering placing online gaming under the “sin and demerit goods” category, subjecting it to a special 40% GST rate.

Officials said the move is guided by the need to align taxation with the country’s “social ethos.” Policymakers have raised concerns over the rapid growth of online gaming in India, highlighting the significant amount of time and money domestic users spend on such platforms.

If implemented, the decision could trigger major disruptions across the online gaming sector — spanning fantasy sports, skill-based gaming, and real-money platforms. Companies in this space have already expressed grievances over the existing 28% GST, introduced in October 2023, which they argue has burdened operators and stifled growth.

The higher 40% slab, expected to be placed before the GST Council, could however bring considerable fiscal benefits to both the Centre and states. Substantial revenue gains are anticipated, as demand for online gaming services has shown resilience despite previous tax hikes.

Government insiders also point to concerns regarding automated payment deductions on these platforms, sometimes occurring without explicit user consent during consecutive gaming sessions.

With the inclusion of online gaming in the proposed top GST bracket, the sector is bracing for potential upheaval. Industry stakeholders fear the tax burden could worsen operational challenges, even as authorities emphasize the importance of addressing societal and economic implications tied to excessive gaming.