The central government is likely to lose between Rs 10,000-Rs 12,000 crore in revenue annually due to the ban on real money gaming (RMG), a senior government official told Moneycontrol.
There was a sharp jump in revenue collection, since October 2023, when the 54th GST Council imposed a blanket 28% tax on all online games – both skill and chance based. Earlier, skill-based games attracted 18% GST.
"We have to forego the revenue because of the ban (on RMG), but the GST cuts –effective from September 22nd—will hopefully offset some of the loss," the official said.
From September 22nd, online money gaming will attract 40% GST, as against 28% levy applicable at the moment. "There is no estimate made of what revenue could be gained as of now," the official noted, adding the ban was, however, necessary as it was a social evil.
"The government was clear that real money gaming can’t be allowed, many households are in severe debt. States also wanted the ban to be imposed," the person said.
The Promotion and Regulation of Online Gaming Act, 2025, passed by the Parliament in August, bars all forms of online real money games while promoting e-sports and other online games. The Act seeks to prohibit advertisements related to online money games and bars banks and financial institutions from transferring funds for any of such games.
Tax experts say that the government’s expectation that a 40% GST rate will compensate for the revenue loss from banning real money gaming is optimistic. The 28% levy introduced in 2023 was estimated to add Rs 15,000 cr annually, largely driven by high-volume real money games, which accounted for nearly three-fourths of the sector’s GST contribution; and by banning this segment, the government effectively shuts off the single largest source of revenue in online gaming, they said.
“Even if casual and skill-based games remain taxable at 40%, their gross gaming revenues are significantly smaller. A higher rate on a smaller base cannot offset the structural loss. Moreover, higher GST on non-RMG segments may also depress user participation, leading to a smaller pie over time,” said Prateek Bansal, Partner, White & Brief - Advocates and Solicitors.
While the rate hike looks arithmetically compensatory, the underlying taxable base has shrunk so dramatically that we are unlikely to see a neutral revenue effect, Bansal said.
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