Online Gaming & Real Money: Legal Grey Zones and the GST Storm

India’s online gaming industry has come a long way from just being a digital activity to becoming a multi-billion-dollar economic sector. With the rising trend of real-money platforms like poker, fantasy sports, and rummy, the industry is now in the middle of legal debates, fragmented regulation, and sudden economic shifts. What earlier people used to call just entertainment has now entered serious legal issues around the constitution, taxation, and Centre vs State controls.

The GST Shock and the Debate on Skill and Chance

In July 2023, a big disruption changed how gaming companies were running their business. Before that, the companies had to pay 18% GST on Gross Gaming Revenue, which is the fee that platforms collect. But after the GST Council’s revision, they now have to pay 28% tax on the full deposit amount made by players, regardless caring whether it’s a game of skill or chance. So if someone deposits ₹100, ₹28 goes directly as tax, even if the platform doesn't make that much from it. Industry is saying this makes the model unsustainable and treats skill games like gambling unfairly.

Right after, legal challenges started coming. Companies such as Dream11 and Gameskraft went to court, saying the new tax rule is against what courts have already decided about the difference between skill and chance games. In one major case, Gameskraft Technologies Pvt. Ltd. v. Directorate General of GST Intelligence, the Karnataka High Court cancelled a ₹21,000 crore tax notice and said rummy is a game of skill. But this is now being appealed in the Supreme Court, and their judgment can change everything for the sector.

Federal Conflicts and Legal Gaps

The industry is stuck in a complicated place within India’s governance. Internet and tax rules come under the Central Government, but gambling is decided by the States. Because of this, rules aren’t the same everywhere. Some states like Tamil Nadu, Telangana, and Andhra Pradesh have banned even skill-based games, saying they’re harmful to public health and can cause addiction. These laws are also being challenged, with some people arguing they break Article 19(1)(g), which allows people to do business or profession freely, and also that states might not have the right powers for this.

Court rulings do not match. The Madras High Court, in Junglee Games v. State of Tamil Nadu, said the ban on poker and rummy by state was unconstitutional. But in 2023, Tamil Nadu came again with a different law, leading to more cases. It shows clearly how no one legal framework exists for online gaming. Platforms like Dream11 still rely on old judgments from courts like the Bombay High Court and even the Supreme Court, saying their games involve skill. Still, courts also said that using “skill” as a label cannot be done to hide gambling methods.

The Centre tried to regulate online gaming using the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2023. It includes some basic rules, like platform registration and safety for users. A Self-Regulatory Body idea was also suggested, but it only has an advisory role and can’t enforce much. The Ministry of Electronics and IT might bring a central authority for this sector, but no one knows exactly when that will happen.

Also Read: India Joins Esports World Cup 2025 with BGMI, S8UL & Broadcast Deal

So the future of online gaming in India now depends on some very important cases waiting in the Supreme Court. These include the question of whether real-money skill games are protected under the Constitution, whether the 28% GST is legal, and whether states can actually ban such games completely. While waiting for these decisions, companies are continuing operations in unclear legal conditions, where every new move can be risky.

India’s gaming growth is both an opportunity and a challenge. Without one strong national law, a balanced tax system, and clear court decisions, the industry might not grow as it should. Until all this is sorted, online gaming will keep floating in a legal grey zone, the future still hanging, like one more toss of a coin.

By Advocate Srijan Tiwari, Delhi High Court