India’s online gaming sector faces patchwork regulation amidst State vs Centre tussle

India’s policy treatment of online gaming is a moving target. Constitutionally, “betting and gambling” sits with the states, which is why Tamil Nadu, Telangana or Assam might treat a real-money game very differently from, say, Nagaland or Sikkim. At the same time, the Union government has stepped in with sector-wide rules under the IT Act, sweeping tax changes under GST, and high-profile enforcement against offshore operators. The result is a patchwork: overlapping State prohibitions or licensing regimes on one side; Central standards on taxation, advertising, and platform due diligence on the other.

How to choose a legal operator?

If you’re a player or an investor trying to keep your footing in this shifting landscape, start with one practical filter: compliance. Look for operators that:

• Respect the State-level law where you live;
• Meet Central IT-rule obligations;
• Are paying GST and deducting income tax correctly.

In addition, to find out about legal platforms, you can consult the selection of the best betting sites, which is useful for understanding which operators comply with the regulations in force. This kind of due diligence approach is a good first defence in a fragmented market of betting sites and gaming apps.

Why regulation feels fragmented?

State law drives the on-the-ground experience. Some States keep outright prohibitions on real-money play (often without distinguishing “skill” from “chance”), while a few have attempted licensing. For example, Assam and Telangana prohibit staking money across the board; Nagaland created a licensing path for online “games of skill”; and Sikkim regulates “online games and sports” but limits access to within the State network. The unavoidable consequence: a game can be legal in one State and blocked in another.

The newest State-to-Centre moves

Tamil Nadu’s 2023 law survived court scrutiny in 2025. After an earlier statute was struck down in 2021, the State returned with a re-enacted framework targeting online real-money games (including rummy/poker) and set up an Online Gaming Authority with KYC and time/advertising limits. In June 2025, the Madras High Court upheld the law, affirming the State’s power to regulate on public-health grounds, even alongside Central IT Rules. Appeals are already percolating toward the Supreme Court.

The GST flashpoint is at the Supreme Court. Since the July 2023 GST Council decision, the Centre has argued that real-money online gaming equals betting/gambling for indirect tax purposes, so 28% on full face value applies. The Court’s forthcoming decisions, tied up with the long-running Gameskraft line, will determine whether “skill” games can be taxed like gambling and whether valuation on deposits (not platform fee/GGR) stands.

Expected impact

For operators (domestic and offshore)

Cost shock from GST: Taxing deposits rather than GGR compresses unit economics sharply, especially for early-stage firms that rely on bonuses to acquire users. Several companies have eaten part of the cost rather than pass everything on, but survey data suggests the GST share has jumped to 50–100% of revenue for a meaningful subset. Expect consolidation and a tilt toward larger, capitalized platforms.

For players

Higher friction, by design: Expect more KYC, warnings, “cool-off” tools, spending/time caps, and age gates, especially in States like Tamil Nadu that hard-code them. That makes onboarding slower but reduces obvious harm vectors.

For the market

Short-term pain, medium-term formalization: Enforcement plus taxes will likely shrink grey-market supply and push volume to compliant brands that can survive the margin squeeze. If PMLA reporting kicks in, payment leakage should reduce further.

Future prospects

Supreme Court on GST (face value vs GGR). The Court’s rulings will determine whether the 28% levy stays on deposits or moves closer to international practice. A face-value win for the Centre cements today’s economics; a platform-fee-based approach would relieve pressure on margins and player pricing. Either way, the Court’s clarity will reduce litigation overhang and unlock investment decisions that are currently on pause.

Bottom line

India is not moving toward a single, neat, federal online-gaming statute tomorrow. Instead, we’re seeing convergence by layers: States drawing hard lines on public-health risks and local policy preferences; the Centre tightening tax, advertising, and intermediary duties; and courts arbitrating the hardest questions (what counts as gambling, how to value it for GST). For operators, the winning playbook is conservative: pay taxes correctly, geofence to State law, build KYC/AML muscle, and design products that clearly avoid wagering. For players, the safest route is equally simple: pick compliant platforms, read the warnings, and understand the tax math before you play.

Disclaimer: Gambling involves risk. Please only gamble with funds that you can afford to lose.