In India, all (online) bets are off

Our goal with The Daily Brief is to simplify the biggest stories in the Indian markets and help you understand what they mean. We won’t just tell you what happened, but why and how, too. We do this show in both formats: video and audio. This piece curates the stories that we talk about.

You can listen to the podcast on Spotify, Apple Podcasts, or wherever you get your podcasts and watch the videos on YouTube. You can also watch The Daily Brief in Hindi.

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In today’s edition of The Daily Brief:

1. No poker face: behind India’s ban on real-money gaming

2. India wants a happy Diwali with GST reforms

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No poker face: behind India’s ban on real-money gaming

2 days ago, the Lok Sabha passed the Promotion and Regulation of Online Gaming Bill, effectively banning real-money gaming. In other words, any game where betting actual money is involved will cease to exist from now on.

This isn't just a simple story of government overreach or industry devastation - it's a complex tale of competing priorities, unintended consequences, and the challenges of regulating emerging technologies.

Let's dive into what actually happened, why it matters, and what it means for India's digital future.

What actually happened?

First, let's establish the verified facts.

On August 20th, 2025, IT Minister Ashwini Vaishnaw introduced the Promotion and Regulation of Online Gaming Bill in the Lok Sabha. The bill was passed by voice vote within approximately seven minutes, though some opposition parties protested the lack of a detailed debate.

The legislation is comprehensive but not a blanket gaming ban. It specifically targets "online money games" — defined as games where users pay fees or deposit money expecting monetary returns, “irrespective of whether such a game is based on skill, chance, or both”.

This definition is crucial because it eliminates the traditional legal distinction between skill-based and chance-based games that has existed since 1867. What's banned includes fantasy sports platforms like Dream11, online rummy sites, poker platforms, and any games involving cash prizes.

But on the other hand, what's explicitly promoted includes e-sports — which could be eligible for government backing and other institutional support, like training academies and official recognition — and social games which don’t have monetary stakes.

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The fines of violating this rule would likely cost more as what you might win in a bet — with penalties of up to three years imprisonment and ₹1 crore fines for operators, with up to two years imprisonment and ₹50 lakh fines for advertisers.

Luck by chance? Or skill?

This ban didn't emerge in a vacuum. It's the culmination of years of regulatory experimentation that reveals the complexity of governing digital platforms.

The story begins with the colonial-era Public Gambling Act of 1867 — more than one-and-a-half centuries ago — which distinguished between games of skill and chance. This framework allowed the real-money gaming industry to flourish by positioning itself in the "skill" category, with court rulings consistently supporting games like rummy and fantasy sports as skill-based activities.

Despite being a colonial legacy, Independent India hasn’t always been against such a framework — in multiple cases, it has held that these are games of skill rather than chance. Take the case of State of Andhra Pradesh v. K. Satyanarayana in 1968, when the court specifically ruled that rummy is a game of skill. The 1996 case Dr. K.R. Lakshmanan v. State of Tamil Nadu extended this to horse racing.

More recently, various High Courts have extended this logic to modern platforms. Fantasy sports, online poker, and other skill-based games have generally received legal protection under this doctrine. If skill predominates over chance, the activity is considered a legitimate business.

However, concerns began mounting, that too at the state level, despite the above cases. Starting in 2017, Telangana and Andhra Pradesh attempted comprehensive bans on online real-money gaming. These efforts faced legal challenges, with several High Courts striking down such bans as unconstitutional violations of the right to trade.

The central government initially took a more moderate approach. In April 2023, they introduced amendments to IT Rules allowing for self-regulatory bodies to certify "permissible" games. This represented an attempt to balance innovation with consumer protection. But this regulatory approach faced implementation challenges. Different industry bodies couldn't agree on standards, and there were questions about the effectiveness of industry self-policing.

A critical turning point came with the GST decision in October 2023. The government implemented a 28% tax on the full face value of gaming deposits — the same rate applied to tobacco and alcohol. This wasn't just a revenue measure; it was a clear signal that the government viewed real-money gaming as a "sin" category. This tax generated a 412% increase in gaming tax revenue, collecting ₹6,909 crore in the six months since launch.

The 2025 bill overrides all past precedents about skill and chance, treating all monetized games identically regardless of their skill component. This creates a potential constitutional conflict. Legal experts argue the bill may violate Article 19(1)(g) by imposing what they consider a disproportionate restriction on legitimate businesses. Moreover, since "betting and gambling" is constitutionally a state subject, the Centre should ideally not have any power in making a country-wide ban.

However, the government twisted the law in their favor cleverly to evade this problem. Instead of looking at it as the State subject of “betting and gambling”, they’re framing this as a problem about online platforms — which, by their nature, encompass all Indian states. Because of that, this is a national concern that requires a Central approach.

Interestingly, the Supreme Court is currently hearing multiple cases on this very skill-versus-chance distinction, making the timing of this legislation particularly significant.

Why is the government doing this?

To understand this policy, we need to examine the government's reasoning.

First comes the argument of social welfare. Government officials believe that gaming addiction is directly linked to financial distress. IT Minister Ashwini Vaishnaw has even said, “In extreme cases, children and young people are taking their own lives because of these [financial] losses”.

He quoted a figure that in the last 2.5 years, Karnataka recorded 32 gaming-related suicides. While that’s not a national statistic, there are signs that this isn’t an isolated number. NIMHANS, a public institution has noted that they have increasingly been getting patients that are addicted to real-money gaming apps.

More than 140 million people in India play on these apps, and that figure nearly triples when it’s IPL season. Interestingly, we also discovered that during the IPL, betting apps cause immense strain on the IT systems of banks due to the immense volume of transactions taking place. Due to this scale, there may be some truth to the fact that these betting apps do cause some level of financial distress.

In fact, the government has characterized this as a societal decision where protecting citizens from potential harm takes precedence over economic considerations. They even estimate that the losses in tax revenue from this ban could go up to ₹20,000 crore. However, this was a calculated decision on their part, taken to serve the “larger public interest”.

Secondly, there’s the national security perspective. The government argues that online gaming platforms can be conduits for "fraud and money laundering." The cross-border nature of many platforms, with complex offshore structures, makes regulation and oversight challenging for authorities. Take the app Probo, for instance, which was raided by the Directorate of Enforcement under fraud allegations.

What’s interesting is that this decision was taken unilaterally, without consulting the industry. Minister Ashwini Vaishnaw stated that it "made little sense to open a prohibition law for consultation," emphasizing that the government had engaged with the sector for years and there was "political unanimity on the problem."

At the same time, however, there is a clear distinction that is now being made for e-sports (like Fortnite and Call of Duty) — which is being legally recognized as a skill-based game. This also means that it may benefit from institutional support in the future, and will have monetary prizes (but not bets).

This is being hailed as a landmark decision in the e-sports industry, but it also means that the government has an opinion of what it considers a sport, and what it doesn’t. And in this case, it has decided that without consulting anyone.

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Possible consequences

The economic impacts of this ban are already being felt across the industry.

In fact, Entrackr reported that Dream11 — which made over ₹6000 crores in FY23 revenue — has decided to wind down its real-money gaming business, which makes up two-thirds of its revenue. As of recording this video, though, we couldn’t confirm this story from elsewhere. But we can confirm that the app Probo is also shutting their business operations in India, issuing a notification to their users that they have paused all money recharges.

And there are a lot more players in the industry that might be forced to make similar decisions, like Games24x7, Mobile Premier League, Winzo, Zupee and others.

Another second-order effect of this law is how it affects content creators and influencers, who make 20-30% of the marketing budget of many of these companies. Experts expect that influencers from tier-2 and tier-3 towns in India, who depended on these apps for their income, will now have to figure out new ways to make money.

The most contentious issue is what happens to user behavior. Industry critics argue that prohibition won't eliminate demand but will push users toward unregulated offshore platforms. They point to examples from states like Telangana, where local bans didn't eliminate gaming but made it harder to regulate and tax. Offshore platforms may offer no safeguards for protecting consumers.

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However, the government's perspective is that allowing harmful activities to continue because people might engage in worse alternatives isn't sound policy. They argue that clear prohibition, combined with promotion of healthier alternatives like E-sports, can both reduce harmful gaming behavior, and also spur companies to adapt to investing in e-sports. Moreover, they believe that they are prepared to meet the challenge of curbing offshore betting.

No more roulette

As we step back and look at this story, what emerges isn't a simple narrative of good versus evil, or right versus wrong. But what gets thrown up are bigger, more philosophical questions that reflect tensions in how societies govern digital markets.

Should governments be allowed to regulate betting activity, especially if it’s done by financially-sound people? Should a government decide what qualifies as a sport, and how much skill or chance it involves? This also springs up questions around the government’s power to kill any industry overnight.

However, the government's concerns about addiction, financial harm, and potential security risks are documented and real, especially when people consider it an escape from poverty. There is a logic behind this ban. Moreover, betting is also not a productive industry like manufacturing or IT, so the economic fallout from this ban may be quite limited.

\What's clear is that this isn't the end of the story, and several factors will determine the policy's success. The ultimate test will be whether this policy successfully protects users from harm without creating worse alternatives.

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India wants a happy Diwali with GST reforms

8 years ago, India brought about a major overhaul to how we implemented indirect taxes. Instead of a variety of taxes, the government suggested a single Goods and Services Tax (GST) that would be applicable across all states.

After 8 years, however, GST hasn’t seemed to deliver on every promise that it made. While it has improved certain things, it seems to have created new difficulties for a variety of parties: be it Indian MSMEs and exporters, or our middle-class.

The Indian government knows that GST is due for a reform, and is expected to table a new set of rules — called GST 2.0 — that govern the tax. The hope is that these reforms come in time as a “Diwali gift” from the government.

But what exactly needs changing is still under lots of debate. Because every policy move comes with a trade-off, and we can’t say for sure whether these reforms will really improve what they set out to change.

So, before these reforms are implemented, we decided to do a primer on how GST has been implemented, the structural problems that exist with it today, and what the future of GST holds.

Let’s dive in.

One nation, one tax

The promise of the GST was simple — replace dozens of overlapping central and state taxes with a single, harmonized system for all of India.

Doing business across Indian states could often feel like navigating different countries. A truck carrying goods from Maharashtra to Tamil Nadu would stop at multiple checkposts, pay different taxes at each state border, and deal with varying regulations. Central excise, state VAT, service tax, octroi — businesses juggled a maze of levies that made simple transactions complex and expensive.

The cascading effect was particularly damaging. Imagine that you’re a textile manufacturer. You pay excise duty on raw materials, then state VAT on intermediate products — paying taxes twice over the same products, with no way to offset them. The final price contains taxes on taxes, ultimately inflating prices for consumers like us. This creates artificial price distortions across the value chain and even makes Indian goods globally uncompetitive.

GST promised to do away with that by simplifying the tax structure for businesses. Take the example of your textile manufacturer. While you will first pay a tax on the selling price of their goods, under GST, you can get back an Input Tax Credit (ITC) for the tax that you paid on buying the raw material. Now, taxes would effectively only be paid on the value added by the textile manufacturer to the raw materials. And this would hold true for all of India.

The result — a cleaner, more efficient, and hopefully broader tax system.

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What did GST get right?

Eight years later, GST has certainly made some progress.

Under GST, India’s tax base has expanded dramatically. From around 6.5 million registered taxpayers at launch, India now has over 15 million GST registrations. This represents a fundamental shift toward economic formalization, as businesses that operated in the shadows have been drawn into the tax net. GST collections have grown from modest beginnings to over ₹22.1 lakh crore in FY2024-25, demonstrating the system's revenue potential.

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It isn’t just the number of taxpayers — the amounts have also increased substantially. Between FY21 and FY25, the gross GST collected more than doubled to ₹25 lakh crore.

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It is also far easier to do business across states, and that can be seen by how much more goods are being shipped across state borders because of GST. In 2022, the Ministry of Transport reported truck travel times to have reduced by 20-30%, and uniform tax rules across states was a key reason why. The state border checkposts that used to create long traffic jams are largely gone, replaced by seamless movement of goods across the country.

And this efficiency gain translates into real economic value. Companies that previously maintained warehouses in multiple states to avoid interstate taxes can now optimize their supply chains better. As companies can now avail ITC, the final prices of goods — and therefore less inflation — would be lower across states.

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The digitization of tax administration has been another quiet revolution. E-way bills track goods movement, e-invoicing ensures real-time transaction reporting, and data analytics help identify evasion patterns. While suffering huge technical glitches initially, the GST Network has matured into the backbone of GST processing.

However, while in theory GST was supposed to simplify everything, its actual design has some unique complexities. And those complexities have created a new set of challenges for the Indian economy.

More money, more problems

The most important feature of the GST is its multi-rate structure. India adopted five main slabs depending on the type of goods: 0% for essentials, 5% for basic necessities, 12% for standard goods, 18% for consumer products, and 28% for luxury goods.

This complexity creates endless classification disputes. Is a cake a standard good or a consumer product? Is a particular food item a "cake" taxed at 18% or a "biscuit" taxed at different rates? Such questions consume enormous administrative resources and can be used for rent-seeking.

The multi-rate structure has also created "inverted duty structures" where inputs are taxed higher than outputs. The textile sector exemplifies this distortion: synthetic fiber is taxed at 18%, yarn at 12%, and final cloth at 5%. As a result, at each step of the textile value chain, businesses have to file claims to get back their ITC refunds, which can be massive.

These structural issues are compounded by the exclusion of major sectors. In industries like petroleum products, electricity, alcohol, and real estate, businesses can’t claim ITC. The reason is simple: the revenue from these items constitutes 33-55% of states' indirect tax collections, making them politically untouchable. These items are subject to cascading taxes.

Many of these items are inputs for India’s 63 million MSMEs — for whom the GST has made things harder.

No country for MSMEs

At The Daily Brief, we’ve covered the various issues that plague India’s MSMEs — from how import tariffs make their lives harder, to why they can’t scale. And we stress on this because for many developing countries, a healthy MSME policy has been essential to growth.

The multi-rate structure is yet another hindrance for Indian MSMEs, as even the smallest trader is forced to become a tax expert. A small retailer dealing in paper products must navigate different rates for pamphlets (5%), letterheads (12%), files (18%), and hardbound registers (28%). This complexity, multiplied across thousands of product categories, has forced many MSMEs to hire tax consultants - an additional monthly cost that erodes their thin margins.

But the biggest issue by far is in the ITC-claiming mechanism. In theory, it sounds simple: pay tax on inputs, claim credit when you sell outputs. In reality, though, it has created a working capital nightmare for MSMEs and exporters.

The reason is simple: the burden of the tax always falls on the buyer. A small manufacturer can only claim ITC after their supplier has filed their tax return and the government has verified it. If the supplier delays filing or makes an error, the buyer's working capital gets blocked indefinitely. It’s worse if those items have inverted duties, which can make the refund amounts huge.

How much of this is a problem, really? It’s true that MSMEs contribute little to GST revenues – businesses under ₹50 lakh turnover constitute over 92% of taxpayers but generate only about 12% of collections. To the government’s finances, that’s not the biggest concern.

But the compliance burden is a structural problem that every small entrepreneur in India has to reluctantly deal with. Unlike for large corporations, these tax burdens aren’t just scaling barriers for MSMEs — they could be the difference between running today and shutting down tomorrow. That is worrying for a sector that employs more than 110 million people and makes up nearly 29% of our GDP.

An unevenly distributed tax

The benefits of GST aren’t evenly distributed, either.

The GST is usually decided by a central council. The central government has one-third of the votes, while states have two-thirds. This ensures that states have a decisive voice in country-wide policies that could affect them considerably. This was an experiment in strengthening cooperative federalism in India.

However, despite this inclusivity, GST has created unexpected tensions in India's federal structure. The central government guaranteed states 14% annual revenue growth for five years, but actual GST collections grew slower than projected in most states. So, the centre compensates states for the shortfalls for a temporary period. But the states continued to struggle to meet pre-GST revenue levels through their own collections, while the compensation created a fiscal burden for the centre.

The compensation period ended in June 2022, leaving states facing a "fiscal cliff”. States that surrendered significant taxation powers now depend heavily on GST Council consensus for rate changes. Though the states can participate in setting rates and rules, they cannot unilaterally respond to local fiscal needs or economic conditions. A system designed to include states has ironically created forces that do the opposite.

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The distributional impact of GST is also uneven across income groups. While 50-60% of poor household consumption is exempt or taxed at 0-5%, wealthy households capture larger absolute benefits from exemptions on education, healthcare, and food simply because they spend more. A poor family might save ₹500 annually from food exemptions while a rich family saves thousands.

But the worst of the brunt is borne by India’s middle class. Their consumption includes significant spending on services that jumped from 15% service tax to 18% GST, creating immediate inflationary pressure on middle-class lifestyles. They consume more manufactured goods in the 12% and 18% slabs, while the wealthy can afford luxury items that can be purchased abroad.

Reform on the menu

As India grapples with slowing middle class consumption driven by weak demand, there is hope in the GST 2.0 reforms to give consumption some support.

The centerpiece of the reforms is a more simplified tax structure: 5% for merit goods and 18% for standard items, plus 40% for select sin goods like tobacco. If the changes go through, 99% of items currently taxed at 12% would move to the 5% bracket, while 90% of goods in the 28% slab would drop to 18%. Far less complicated than the earlier slabs.

This could have two opposite effects. On the one hand, it could reduce tax revenue for the Centre. Based on different scenarios, SBI calculates that the GST reforms could lead to a loss of ₹85,000 crores worth of revenue. This would also result in a further shortfall for how much money the states get.

But will the benefit of this be bigger than the cost? SBI estimates that reduced GST could boost what households spend manifold, increasing consumption by ₹1.98 lakh crore. Which means, for every rupee of GST revenue lost, consumption is multiplied by 2.3 times! That is a bold future projection, but the Indian stock market also believes similarly, anticipating the reforms with lots of excitement.

However, it cannot be concluded that GST reforms alone would boost consumption, or by such a huge multiplier. Wages have been slowing for Indian workers, which has affected domestic consumption significantly. Urban youth unemployment is also high at 19%. With US tariffs, one avenue for growth for Indian exports is effectively being shut out. There are lots of factors that affect consumption, and just like earlier, could fall short of the GST 2.0 projections.

But even within these reforms, it will take a lot more than simplifying tax slabs to bridge the gap between estimates and reality. As long as the burden of the tax remains on the buyer, and their inputs continue to be double-taxed, MSMEs will find little relief in these reforms. Moreover, states will expect more compensation to make up a shortfall.

Only time will tell whether GST 2.0 would change it from a bureaucratic maze into the "good and simple tax" it was meant to be.

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Tidbits:

1. Heavy rains may be disrupting roads, but they are powering up India’s dams. Ratings agency ICRA expects India’s hydropower generation to rise 10% in FY26, marking a second straight year of growth after a 10% jump in FY25. This comes after a steep 17% drop in FY24 due to weak rains.

Source: Mint

2. India’s private sector activity expanded at the fastest pace on record in August, driven by a surge in demand. The HSBC India Composite PMI jumped to 65.2, the highest since the survey began in 2005. New orders rose at the sharpest pace in nearly 18 years, with exports growing at the fastest rate since 2014. The services sector led the rally with its index at 65.6, while manufacturing PMI hit 59.8, the highest since 2008.

Source: Reuters

3. The Finance Ministry has directed public-sector banks to expand lending beyond big corporates and extend more credit to mid-market firms, MSMEs, agriculture, engineering, and startups as a buffer against the impact of hefty U.S. tariffs. Banks are also being urged to strengthen recovery strategies—including one-time settlements and joint lenders’ forums—to protect their margins and sustain profitability.

Source: Business Standard

4. Vedanta’s plan to split into six listed entities has been delayed after the Centre raised serious concerns—such as non-disclosure and concealed liabilities—and SEBI issued a compliance warning for modifications made post-clearance without proper approval. The National Company Law Tribunal has deferred the hearing to September 17, intensifying regulatory scrutiny of the demerger.

Source: Business Standard

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- This edition of the newsletter was written by Manie, Prerana, and Bhuvan

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