SC Upholds 28% GST On Online Gaming Firms — Will it hurt gamers?

In a historic ruling for the online gaming sector in India, the Supreme Court on Wednesday upheld the government’s retrospective levy of 28 per cent goods and services tax (GST) on online gaming companies and stated that the framework was constitutionally valid. The apex court bench, headed by Justices JB Pardiwala and R Mahadevan, said that online gaming sites were not just intermediates, but instead they are suppliers under GST.

It also said that games that involve staking money on uncertain outcomes, including fantasy sports and other real money online games, are covered under the definition of betting and gambling for the purpose of GST.

What Did The High Court Decide?

The apex court said that “Online gaming activities, including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of the GST framework,” as reported by PTI.

The bench also observed that even skill-based games can be characterised as betting and gambling once money is involved in uncertain outcomes.

The Supreme Court also upheld the GST show-cause notices issued to gaming companies and quashed the relief given by the Karnataka High Court earlier.

The Importance of This Verdict For Gaming Companies

The judgement is considered a giant blow for the real-money gaming (RMG) industry, which was already facing rough weather with the more severe regime on online gaming introduced by the government.

The crux of the debate was the manner of computing GST on online gaming transactions. The tax authorities had argued that gaming platforms should pay GST at 28% on the full face value of deposits made by users. But gaming firms argued the tax should only be applied to the commission or platform fee they charge – referred to as ‘Gross Gaming Revenue’ (GGR) – which is usually between 5% and 15% of user deposits.

Several companies said the retrospective tax demands were many times higher than their total revenues and could lead to shutdowns across the sector.

Tax dispute of nearly ₹2.5 lakh crore

The Supreme Court had in August 2025 reserved its verdict on retrospective GST notices of nearly Rs 2.5 lakh crore issued to real-money gaming platforms.

Now the court has directed the GST authorities to go ahead with show-cause notices as per law and give an opportunity to companies to respond before authorities.

State Can Prohibit Internet Money Games

Another significant observation made by the Supreme Court was that states have the power to prohibit online money games even if they have an element of skill.

The court allowed the appeals filed by Tamil Nadu and Karnataka and set aside the earlier judgements of the Madras and Karnataka High Courts which had struck down state laws regulating or banning online gaming with stakes.

Gaming Industry Is Already Under Pressure

The verdict comes after India’s real-money gaming industry is already facing regulatory uncertainty. In August 2025, the government brought in the Promotion and Regulation of Online Gaming Act (PROGA), which criminalises online games of chance that are allowed with a user staking real money for prizes.

This came into force on 1 May 2026 and has already started to slow the $3.5 billion gaming market. There have already been 3,000-plus jobs cut in what are perceived to be struggling companies as income is decreasing and legislation increases.

The Verdict That Could Transform India’s Gaming Industry – Will It Hurt Gamers?

The Supreme Court verdict is likely to change the future of India’s online gaming sector. The judgement is a big blow to gaming companies already struggling with tighter regulations, as it upholds retrospective GST demands and recognises online money gaming under the betting and gambling framework, significantly increasing their compliance and tax burden.

(With inputs from agencies)

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