28% GST Saga: How Gaming Platforms Are Fiercely Fighting Unfair Tax Rules

The 28% GST Saga has sparked a fierce rebellion among India’s online gaming platforms, as they challenge the government’s controversial classification of participation fees as actionable claims. This article unpacks the high-stakes Supreme Court battle, the financial strain on gaming startups, and the broader implications for India’s thriving gaming ecosystem. From legal arguments to industry outcry, Startup INIDAX explores why the 28% GST levy threatens innovation and what’s at stake for players, platforms, and the future of gaming in India.

Introduction: The 28% GST Saga Takes Center Stage

The 28% GST Saga is shaking the foundations of India’s online gaming industry, pitting platforms like Dream11, Gameskraft, and WinZO against a government tax policy that’s drawing fierce criticism. At the core of this storm is the classification of participation fees as actionable claims, subjecting the full entry amount players pay to a steep 28% GST. Since October 2023, this rule has threatened to choke gaming startups, raise costs for players, and push users toward unregulated platforms. Startup INIDAX dives into this gripping saga, unpacking the legal battles, financial burdens, and the fight for fairness in India’s $7 billion gaming market.

Understanding Participation Fees As Actionable Claims

So, what exactly are participation fees as actionable claims? When players join online games like fantasy cricket or rummy, they pay an entry fee—say, ₹500. Typically, 10-20% of this (the platform fee or Gross Gaming Revenue) goes to the platform, while the rest forms a prize pool for winners. Historically, only the platform fee faced an 18% GST, reflecting the service provided. But in 2023, the government redefined the entire entry amount as an “actionable claim”—a legal term for claims like lottery winnings or gambling bets—slapping a 28% GST on it.

For example, if 10 players pay ₹500 each, the platform collects ₹5,000. Previously, the platform’s ₹500 fee was taxed at 18% (₹90). Now, the full ₹5,000 is taxed at 28% (₹1,400), skyrocketing costs. Gaming platforms argue this mislabels skill-based games as gambling, ignoring their role as facilitators who hold prize pools in trust.

How the 28% GST Rule Came to Be

The 28% GST Saga kicked off in July 2023, when the GST Council, chaired by Finance Minister Nirmala Sitharaman, decided to tax online gaming, casinos, and horse racing at 28% on the full value of bets or entry fees, effective October 1, 2023. Before this, skill-based games enjoyed an 18% GST on platform fees, recognizing their distinction from chance-based activities. The Council’s move, backed by amendments to the Central GST Act, lumped online gaming into the actionable claims category, erasing this nuance.

A Group of Ministers, led by Meghalaya’s Conrad Sangma, had debated the issue for years, ultimately recommending a uniform tax rate. The government also applied the rule retrospectively, issuing notices for back taxes from years prior, totaling ₹1.5 trillion across companies like Gameskraft and Head Digital Works. The intent, Sitharaman said, was to ensure tax parity, but the industry sees it as a death knell.

Why Gaming Platforms Are Fighting Back

Gaming platforms are pushing back hard, and for good reason. First, they argue that labeling participation fees as actionable claims is fundamentally flawed. In the Supreme Court, senior advocate Harish Salve, representing the E-Gaming Federation (EGF), stressed that platforms don’t “supply” actionable claims—they facilitate games, holding player funds in escrow. Taxing the entire entry amount, he said, distorts the economics of skill-based gaming.

Second, the financial hit is staggering. Notices like the ₹21,000 crore demand on Gameskraft dwarf the industry’s revenues, threatening bankruptcy for startups. The All India Gaming Federation (AIGF) warns that player costs could surge by up to 1000%, driving users to unregulated offshore platforms that evade taxes.

Finally, platforms feel unfairly targeted. Courts, including the Karnataka and Bombay High Courts, have upheld that games like rummy and fantasy sports are skill-based, not gambling. Yet, the GST Council’s one-size-fits-all approach ignores these rulings, lumping legitimate businesses with casinos.

Inside the Supreme Court: A Legal Showdown

The 28% GST Saga has reached a critical juncture in the Supreme Court, where over 50 gaming companies, alongside EGF and AIGF, are challenging the tax. In January 2025, the Court stayed GST notices to keep them from expiring, offering a lifeline. As of May 14, 2025, hearings continue, with Justices J.B. Pardiwala and Manoj Misra questioning the government’s authority to tax skill-based games as actionable claims.

Harish Salve argued that prize pools are player funds, not platform revenue, comparing the tax to levying GST on bank deposits. The bench raised concerns about applying archaic racing tax provisions to modern digital platforms, hinting at potential constitutional issues. The next hearing, set for March 18, 2025, could be a game-changer for the industry.

The Fallout: Impact on Startups and Players

India’s gaming industry, with 442 million players and a projected $7 billion valuation by 2026, is at a crossroads. The 28% GST Saga could shrink prize pools, inflate player costs, and erode startup margins. Smaller platforms, unable to absorb the tax, may fold, leading to market consolidation favoring giants.

Startups, the lifeblood of platforms like Startup INIDAX, face an existential threat. Venture capital, already cautious amid global economic headwinds, may flee a sector burdened by unpredictable taxes. Job losses, stalled innovation, and a weakened global presence loom large. Players, meanwhile, are hit with higher fees and smaller winnings, with some turning to offshore platforms that operate in regulatory gray zones.

Industry Voices: What Leaders Are Saying

The industry isn’t staying quiet. EGF’s Anuraag Saxena hailed the Supreme Court’s stay as a “step toward fairness,” predicting that balanced taxation could unlock “massive investments and jobs.” WinZO’s Paavan Nanda warned that the tax could “kill innovation” and empower illegal operators. AIGF’s Malay Kumar Shukla echoed this, noting that offshore platforms could exploit the chaos.

Legal experts like Gunjan Prabhakaran see the stay as a “breather,” protecting startups from aggressive tax recovery while the Court deliberates. On X, players have voiced frustration, with posts decrying the “unjust” tax and its impact on their gaming experience. Startup INIDAX stands with these stakeholders, amplifying their call for reform.

What’s Next for India’s Gaming Industry?

The 28% GST Saga’s resolution rests on the Supreme Court’s verdict. A ruling favoring the industry could reinstate the 18% GST on platform fees, preserving affordability and growth. Conversely, upholding the 28% tax could force platforms to pass costs to players, shrink the market, and cede ground to unregulated operators.

The GST Council promised a review six months after the rule’s implementation, but updates are scarce. Startup INIDAX remains hopeful, believing India’s gaming sector can flourish with fair policies. The government must balance revenue needs with the risk of strangling a vibrant industry. March 2025 will be pivotal.

Conclusion: A Plea for Fair Tax Policies

The 28% GST Saga is a defining moment for India’s gaming industry. By challenging the classification of participation fees as actionable claims, platforms are fighting for survival, innovation, and fairness. Startup INIDAX supports these trailblazers, urging policymakers to adopt a tax framework that fosters growth, not destruction. As the Supreme Court prepares to rule, let’s hope for a future where India’s gaming dreams can thrive.