In a twin move that has sent shockwaves through the online gaming industry, the Indian government has enacted the Promotion and Regulation of Online Gaming Act, 2025 (PROGA) and, just weeks later, approved a steep hike in the Goods and Services Tax (GST) rate on online money games from 28% to 40%. The decisive actions signal a clear and hardline stance against the real money gaming (RMG) sector, which has long been a source of legal and regulatory debate.
The PROGA, which received Presidential assent on August 22, 2025, bans all forms of online money games, regardless of whether they are based on skill or chance. The government’s stated objective is to curb issues like addiction, financial fraud, and money laundering. The new law has already led to several legal challenges from firms that operate platforms for games of skill, who argue the blanket ban is unconstitutional.
The latest blow came from the GST Council, which, at its 56th meeting, approved a new 40% tax rate on a list of “sin goods,” which now includes online money gaming, casinos, lotteries, and betting. This places the sector in the highest GST slab, alongside items like tobacco and luxury cars. The new tax rate, which will come into effect on September 22, 2025, is a major increase from the previous 28%.
Industry experts and legal analysts have expressed grave concerns about the combined impact of these two measures. Many believe that the 40% GST, if applied to the full face value of bets, will make business models completely unviable, forcing many companies to either shut down or move their operations offshore. The legal battle is already intensifying, with firms challenging PROGA in high courts, and industry groups are preparing to launch new challenges against the GST hike.
In a stark contrast, the GST Council also reduced the tax on household games like playing cards, carrom, and chess boards from 12% to 5%. This move highlights the government’s policy of promoting casual and social gaming while taking a firm stand against platforms that it considers to be causing social harm. The coming months are expected to be a period of significant turmoil for the real money gaming industry as it grapples with these dual regulatory and financial pressures.
Key Highlights:
- Dual Regulatory Crackdown: The government has enacted the Promotion and Regulation of Online Gaming Act, 2025 (PROGA), which bans real money gaming, and has also increased the GST rate on these activities to 40%.
- Financial and Legal Impact: The 40% GST hike, effective from September 22, combined with the PROGA ban, is expected to severely impact the industry, making business models unviable and leading to fresh legal challenges.
- Sin Goods Category: The GST Council’s decision places online money gaming in the highest tax slab, classifying it as a “sin good” alongside items like tobacco and luxury vehicles.
- Contrasting Policy: While heavily taxing and banning real money gaming, the government has reduced the GST on household games like chess and carrom boards to 5%, signaling a clear distinction in its policy.