The Supreme Court of India has delivered a significant ruling regarding the imposition of the Goods and Services Tax (GST) on online gaming bets, affirming a 28% tax on the full face value of bets placed through these platforms. This decision arose from the case Directorate of Revenue Intelligence v. Gameskraft, where the Bench comprising Justices JB Pardiwala and R Mahadevan declared the GST levy constitutionally sound.
The Court maintained that the GST Act provides statutory authority for such taxation, dismissing any notion that the levy violates the constitutional framework. It clarified that online gaming entities are not mere intermediaries but are suppliers of actionable claims subject to GST. Consequently, the Court endorsed the Central Goods and Services Tax (CGST) rules that permit GST imposition on the entire value of bets placed through online gaming platforms and casinos.
A key issue in the judgment was whether the games in question could be classified as betting activities or skill-based games. The Supreme Court concluded that even skill-based games assume the nature of betting and gambling for GST purposes once money is wagered on uncertain outcomes.
This ruling overturned a previous decision by the Karnataka High Court favoring Gameskraft, an online gaming company. It reinstated a show-cause notice issued to Gameskraft in September 2022, which demanded approximately ₹21,000 crore in GST. The Court, however, left the final judgment to the relevant GST authorities.
The decision has broad implications for pending show-cause notices and adjudication proceedings against online gaming, fantasy sports, and casino operators, which will now be resolved in accordance with the Supreme Court’s ruling. The detailed judgment is still awaited.
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This case stemmed from GST notices issued to real-money gaming entities, asserting that a 28% tax applied to the total bet or contest entry amounts, rather than just the platform fee or gross gaming revenue. The gaming sector argued that GST should be levied solely on gross gaming revenue, the amount retained after payouts, contending that taxing the full stake amount was excessive and impractical.
The controversy intensified with the GST Council’s 2023 decision to impose a 28% GST on the full face value of online gaming, casinos, and horse racing. The Revenue Department maintained that the amendment merely clarified the existing legal stance, whereas gaming companies contended that the levy should not apply retrospectively for periods before October 1, 2023.
Initially, the industry’s tax liability was estimated at about ₹1.12 lakh crore, but later reports suggested potential exposure could reach up to ₹2.5 lakh crore. A leading case involved Gameskraft Technology, which was hit with a GST notice demanding around ₹21,000 crore for betting volumes of approximately ₹77,000 crore through platforms like Rummy Culture and Gamezy.
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Gameskraft contested this notice at the Karnataka High Court, which ruled in its favor, recognizing rummy as a skill-based game not subject to the alleged GST claims. However, the GST department challenged this decision in the Supreme Court. The Court stayed the High Court’s ruling in September 2023 after the department argued that it adversely affected similar tax proceedings against other online gaming firms.
The Supreme Court’s deliberations addressed whether online skill games played for stakes could be classified as betting or gambling for GST purposes, whether the 2023 amendments were merely clarifications, and if the tax demands could be applied retrospectively. The Court confirmed that these amendments were clarificatory in nature.
Previously, in December 2024, the Supreme Court had suspended GST proceedings against these companies following the Centre’s declaration that certain show-cause notices would conclude by February 2025. This interim order has now been vacated, with the matter reserved for judgment in August 2025.
This judgment could also influence challenges by online gaming companies against laws prohibiting real-money games in India. The gaming companies were represented by a team of notable Senior Advocates, including Harish Salve, AM Singhvi, and Mukul Rohatgi, among others. The Central Government’s legal representation included Solicitor General Tushar Mehta and Additional Solicitor General N Venkataraman.
