Centre to SC: Games of Skill with Stakes Are Gambling, Must Face 28% GST on Full Entry Amount
With the Directorate General of GST Intelligence (DGGI) having issued show-cause notices worth Rs. 1.12 lakh crore to gaming companies and casinos, the stakes in this case are high.
In a landmark legal battle that could define the future of India’s booming online gaming industry, the Central Government has told the Supreme Court that any game involving monetary stakes—regardless of whether it is based on skill or chance—constitutes gambling and must be taxed accordingly at 28% under the Goods and Services Tax (GST) regime. The submission came during a...
In a landmark legal battle that could define the future of India’s booming online gaming industry, the Central Government has told the Supreme Court that any game involving monetary stakes—regardless of whether it is based on skill or chance—constitutes gambling and must be taxed accordingly at 28% under the Goods and Services Tax (GST) regime.
The submission came during a crucial hearing on Monday before a bench comprising Justices J.B. Pardiwala and R. Mahadevan. The case, which includes over two dozen clubbed petitions, could have sweeping implications for platforms offering fantasy sports, online Rummy, poker, and other real-money digital games.
Skill vs. Stake: Government’s No-Distinction Argument
Representing the Centre, Additional Solicitor General (ASG) N. Venkataraman argued that the presence of money stakes is the decisive factor in characterising an activity as gambling under the GST law. “Whether a game involves skill or not is irrelevant when financial stakes are involved. It becomes betting and gambling,” he told the court. The ASG cited the Supreme Court’s earlier rulings, including the Constitution Bench verdict in Satyanarayana, to assert that games played for stakes with uncertain outcomes amount to gambling.
The government’s position is that such activities qualify as “actionable claims” under the Central GST Act, 2017, and must be taxed on the total contest entry amount—including prize pools—not just on the platform’s commission or gross gaming revenue. This approach marks a significant shift from the industry’s prior practice of paying 18% GST on platform fees, treating such services as taxable supplies.
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Wider Legal and Economic Stakes
The case stems from the Karnataka High Court’s 2023 decision that quashed a massive Rs. 21,000 crore GST notice against online gaming platform Gameskraft, ruling that online Rummy did not constitute gambling. In response, the Supreme Court stayed several such notices and decided to consolidate 27 writ petitions filed by companies such as Dream11, Games24x7, and Head Digital Works for a unified hearing.
With the Directorate General of GST Intelligence (DGGI) having issued show-cause notices worth Rs. 1.12 lakh crore to gaming companies and casinos, the stakes in this case are high. The court’s final verdict will not only determine the tax liability for these companies but also shape the regulatory architecture for the online gaming industry in India.
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Centre Asserts Constitutional Power Over Gambling Taxation
The government also clarified that under the 101st Constitutional Amendment, taxing powers related to betting and gambling now rest with the Centre through Article 246A. It argued that while states may regulate gambling, their authority does not extend to taxation. The recent 2023 amendment to the GST law, it said, was merely clarificatory in nature and did not introduce new powers, as the power to tax actionable claims had already existed.
Citing state laws like Nagaland’s, which provide legal protection to games of skill, the Centre pointed out that even these laws treat betting on outcomes of skill-based games as gambling if money is involved.
Industry Pushback: Protecting the Integrity of Skill-Based Games
Senior Advocate A.M. Singhvi, appearing for one of the gaming platforms, strongly opposed the government’s stance. “Does wagering on chess make it gambling? The character of the game cannot be changed like that,” he said, arguing that the presence of money does not alter the fundamental nature of a skill-based game. He warned that treating all monetary contests as gambling could severely harm legitimate, skill-based digital businesses in India.
Abhishek A. Rastogi, counsel for another petitioner, noted, “If games of skill are treated as gambling solely due to monetary stakes, we risk blurring crucial legal boundaries. This will not just impact taxation, but the survival of lawful enterprises.”
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Looking Ahead
The court has scheduled the next hearing for Tuesday, May 6, 2025, where it will further examine whether GST should be applied on the full entry amount or only on platform revenue. The decision could fundamentally redefine how India’s legal and tax system views online gaming—a sector projected to reach $5 billion in annual revenue by 2026.
Until then, uncertainty looms over both gaming firms and the lakhs of users who engage in what they consider skillful competition, not gambling.
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