The Supreme Court on Wednesday upheld the retrospective levy of 28 per cent GST on online gaming bets, holding that the tax was constitutionally valid and did not violate the constitutional framework governing Goods and Services Tax.
The Supreme Court of India in New (photo: IANS)
The Supreme Court on Wednesday upheld the retrospective levy of 28 per cent GST on online gaming bets, holding that the tax was constitutionally valid and did not violate the constitutional framework governing Goods and Services Tax.
A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan held that once money is staked on uncertain outcomes, even games involving skill acquire the character of betting and gambling for GST purposes. The Court further ruled that online gaming operators are not mere intermediaries but suppliers of actionable claims liable to GST on the full-face value of bets and contest entry amounts.
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The judgment came in a batch of cases arising from GST notices issued to online gaming companies on the basis that 28 per cent GST was payable on the entire stake amount and not merely on the platform fee or gross gaming revenue retained by the companies.
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The Court also set aside the Karnataka High Court judgment that had ruled in favour of online gaming platform Gameskraft Technology. It restored the September 2022 show-cause notice issued to Gameskraft demanding nearly ₹21,000 crore in GST. However, the Court clarified that the final adjudication on the notice would be undertaken by the competent GST authorities in accordance with law.
The Bench upheld the validity of the relevant CGST Rules and held that the 2023 amendments brought by the GST Council were clarificatory in nature and could operate retrospectively.
The gaming industry had argued that games such as rummy involved substantial skill and therefore could not be treated as betting or gambling. It was further contended that GST could only be levied on gross gaming revenue and not on the total deposits or stakes placed by users, which the industry claimed would make the business commercially unviable.
The controversy escalated after the GST Council in 2023 decided to impose 28 per cent GST on the full-face value of online gaming, casinos and horse racing. The industry’s total tax exposure, including penalties and interest, was estimated to run into lakhs of crores of rupees.
The Supreme Court had earlier stayed the Karnataka High Court ruling in favour of Gameskraft in September 2023.
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