28% GST on Online Games: Supreme Court to Deliver Landmark Tax Ruling

India's online gaming industry faces a second major legal battle alongside the PROGA constitutional challenge — this one focused on taxation. The Supreme Court is hearing petitions from multiple gaming companies challenging the government's decision to apply a 28% Goods and Services Tax (GST) on games of chance, arguing that skill-based games should qualify for the lower 18% GST bracket.

The GST Dispute Explained

Under India's GST Act of 2017, games of skill attract an 18% tax rate, while games of chance are taxed at 28%. The GST Council, in a 2023 decision, applied the 28% rate to the full face value of deposits on most online gaming platforms — including rummy, fantasy sports, and poker — treating them as games of chance despite years of court rulings recognising them as skill-based activities.

Gaming companies received retrospective tax demands running into thousands of crores. Some of the largest players in the industry, including Dream11, Games24x7, and Head Digital Works, faced notices that effectively equalled or exceeded their total revenues.

What the Supreme Court Is Deciding

The court must determine two connected questions: first, whether the 28% rate is legally justified for skill-based games; and second, whether these tax demands can be applied retrospectively to transactions that occurred before the GST Council's 2023 clarification.

The GST department has transferred all related cases against gaming companies to the Supreme Court for consolidated hearing, signalling that the government expects a definitive ruling rather than state-by-state outcomes.

Potential Outcomes

If the Supreme Court rules in favour of gaming companies, the 28% rate could be reduced or limited to games of pure chance like slots and roulette. This would provide significant financial relief to skill-gaming operators and potentially allow some platforms to restart operations.

If the government's position is upheld, the tax demands could accelerate the closure of surviving gaming businesses and further consolidate the offshore shift among Indian players.