India May Hit Online Gamers With A 40% Tax

India’s online gaming industry is on the brink of a major shake-up as the central government reportedly proposed a 40% "sin tax" on digital games, bringing them into the same category as cigarettes, luxury cars, and other non-essential indulgences. This new tax framework is part of the broader GST 2.0 overhaul and aims to regulate spending on entertainment while boosting government revenue.

The Indian Express has reported how current winnings from online games are taxed at a flat 30%, with an additional Tax Deducted at Source (TDS) on net earnings. However, under the proposed changes, both players and gaming platforms could face significantly higher costs. Industry insiders have already reacted, with stock prices of online gaming companies dropping up to 4.5% following the announcement.

The Supreme Court is also reviewing whether online gaming platforms should be taxed at 28% GST on the total value of bets, treating these games more like gambling. This approach, supported by the Directorate General of GST Intelligence, could further increase the financial burden on players and operators alike. Critics warn that such steep taxation might discourage participation, slow the industry’s rapid growth, and create additional compliance challenges for operators. Players could face higher entry costs, while platforms would need to navigate more stringent regulations.

Supporters, however, argue that the move could help regulate excessive gaming and align India’s digital gaming sector with other controlled entertainment products. India has emerged as one of the fastest-growing hubs for online gaming, with millions of players engaging daily in fantasy sports, real-money gaming, and casual mobile games. The proposed taxes mark a significant turning point, emphasising the government’s intent to balance industry growth with responsible regulation. For players and operators alike, the coming months could redefine how online gaming is experienced and monetised across the country.