Real-money gaming firms weigh next moves after Supreme Court GST blow
Real-money gaming companies are evaluating their next steps after suffering a major setback in the Supreme Court, which rejected the industry’s challenges to retrospective tax demands of nearly Rs 2.5 lakh crore and upheld the constitutional validity of the 28 per cent goods and services tax (GST) levy.
According to people familiar with the matter, the industry is considering several options, including filing a review petition, seeking a hearing before a larger bench, approaching the GST Council, or engaging with the government to work out a settlement or resolution framework.
"There aren't many options in the hands of companies at this point. One can consider filing review petitions, hoping that the Supreme Court changes its position. But the chances of getting a different outcome are quite slim," a top gaming executive told Moneycontrol.
If not, the next steps would be adjudication of the show-cause notices, which will allow companies to appeal, dispute the tax demand figures, and challenge them on different grounds, a process that could take 3-6 months.
"When the law banning the industry was introduced last year, there was still some hope that maybe we could pivot into some other areas. But with this judgment, all that has been shattered to pieces. Everybody is staring at bankruptcy," a second industry executive said.
The big players in this space include Dream11, Games24x7, Mobile Premier League, Gameskraft, Head Digital Works, Junglee Games, WinZO, and Zupee.
In August 2025, the Indian government enacted a new online gaming law, the Promotion and Regulation of Online Gaming Act (PROGA), which prohibits online money games, where a user makes a deposit, directly or indirectly, with the expectation of earning winnings on that deposit.
This triggered a sudden collapse of the country's $3.5 billion RMG industry, leading to a widespread cost-cutting, with companies laying off over 3,000 employees as revenues dried up. These platforms had spent the past year scrambling to pivot or diversify into newer areas, racing to find ways to survive in a radically altered regulatory landscape. The rules formally came into effect from May 1, 2026.
"The judgment has significant implications for online gaming companies, particularly due to its retrospective effect. Businesses now face not only a higher GST burden going forward, but also substantial legacy tax demands, placing serious pressure on balance sheets, liquidity and investor confidence across the sector," said Pracheta Redhu, Counsel, Pioneer Legal.
Between 2023-24, over 50 petitions were filed by RMG platforms including Gameskraft, Head Digital Works, Games24x7, Baazi Games, and WinZO and RMG industry associations such as EGF (E-Gaming Federation) and AIGF (All India Gaming Federation) challenging retrospective demand tax notices, calculated at 28 percent on the face value of bets.
The industry-wide notices were issued after the Supreme Court stayed a Karnataka High Court order that previously quashed a Rs 21,000 crore tax notice issued to Gameskraft for alleged tax evasion in September 2022.
At the heart of the dispute was differing interpretations of how GST should be levied on RMG platforms. The tax authorities demanded 28 percent GST on the full face value of deposits. Platforms however argued they should only pay tax on the commission they charge to host the tournament, also known as Gross Gaming Revenue (GGR), which typically ranges between 5-15 percent of the deposits.
However, a bench of Justices JB Pardiwala and R Mahadevan sided with the tax department, ruling that real-money games involving pooled stakes and contingent prize structures give rise to "actionable claim interest" that are taxable under the current GST framework.
The bench also held that these platforms are not mere intermediaries facilitating transactions between participants but themselves constitute 'suppliers of actionable claims' within the framework of CGST legislation.
It further noted that skill-based games acquire the character of betting and gambling under the GST law once players stake their money on uncertain outcomes.
“Mere commercial hardship, reduction in profitability, or increased tax incidence cannot by itself render a fiscal measure unconstitutional,” the bench observed.
Additionally, the court also held that regulating or banning online gaming fell within the ambit of state legislatures under Entry 34 of the state list of the Constitution which allows states to regulate gambling and betting.
Jay Sayta, a technology and gaming lawyer, said this "creates a clear question mark on the power of the Centre to ban online money games."
