Supreme Court GST Case Challenges Future of Skill-Based Online Gaming

GST Dispute Puts Spotlight on Legality of Skill-Based Betting

India’s Supreme Court is reviewing a landmark case that could redefine the regulation and taxation of online gaming platforms. At the heart of the case is whether placing monetary stakes, regardless of whether the game involves skill or chance, should subject all formats to the same tax rules as games of chance.

A decision favoring uniform taxation could have wide-reaching effects on platform sustainability, product development, and user participation in this fast-growing industry.

Government’s Stance: Betting Equals Gambling

The federal government argues that betting, regardless of the underlying game’s nature, constitutes gambling. Citing precedents and legal interpretations, the Centre maintains that placing a monetary stake on any outcome triggers the same tax obligations as traditional forms of gambling. To support its argument, the government compares betting on fantasy sports to betting on a football match. Both, it says, involve unpredictable outcomes beyond the bettor’s control.

The government’s position is bolstered by amendments to the Central Goods and Services Tax (CGST) Act, effective from October 2023. These changes introduced the term “online money gaming” and reclassified all such activity as “specified actionable claims,” aligning it with lottery and gambling under GST rules.

Industry Response: Skill and Wagering Are Not Synonymous

Industry advocates argue that taxing all forms of online gaming the same overlooks important differences in how these games operate. They contend that strategic gameplay, where outcomes depend on user decisions rather than chance, should be treated differently for tax purposes. The current model, they say, risks penalising legitimate platforms and distorting the market.

At the heart of the matter is whether games of skill, such as fantasy sports and poker, should be taxed under the same Goods and Services Tax (GST) framework as games of chance. The verdict could not only redefine how online gaming is regulated but also determine the financial viability of platforms offering skill-based wagering.

This legal scrutiny comes at a time when new 2025 online casinos and gaming platforms are proliferating with increasing popularity and demand across the country. Industry stakeholders warn that an unfavorable ruling could discourage innovation, while others argue that uniform taxation is crucial to curb misuse and ensure consumer protection.

Legal Precedents and Pending Rulings

The current case builds upon earlier judicial decisions, including the 2020 Karnataka High Court ruling in Skill Lotto Solutions (P) Ltd v. Union of India, which upheld a distinction between skill and chance-based games and exempted the former from GST. The Supreme Court is now reviewing this ruling, alongside broader questions about the classification and valuation of online gaming under GST laws.

Two major issues are under scrutiny: first, whether online gaming with monetary stakes is a game of skill or chance; second, whether the 28% tax rate should be applied retrospectively or only from the date of the 2023 amendments.

New Valuation Rules: Financial Impact and Constitutional Concerns

A key point of contention is Rule 31B, introduced in 2023, which mandates GST on the total bet amount rather than on the platform’s commission or service fee. This valuation rule significantly raises the tax burden and disrupts the economic model of many platforms.

Critics argue that this provision violates Article 14 of the Indian Constitution, which ensures equality before the law. They contend that retrospective application of such tax laws, absent explicit legislative intent, contradicts fundamental principles of fiscal legislation.

So What’s Next? Regulation or Reclassification?

As the court deliberates, industry leaders and legal experts call for nuanced regulation rather than blanket taxation. Proposals include establishing an independent regulator like the Telecom Regulatory Authority of India (TRAI) or creating a self-regulatory body for online gaming platforms. These frameworks could better accommodate the complexities of distinguishing between skill and chance in digital gaming.

The Supreme Court’s decision, expected soon, will be a defining moment for both GST policy and the future of India’s online gaming industry.