The Supreme Court is set to deliver a decisive verdict on July 25 in the ₹2.5 lakh crore tax dispute involving multiple online real money gaming (RMG) platforms. This case is among the most significant tax litigation matters in the country’s legal history.
The dispute centers around the interpretation of Rule 31A of the Central Goods and Services Tax (CGST) Rules, which mandates a 28% Goods and Services Tax (GST) on the face value of bets. While the government claims this tax should apply to all forms of online gaming involving monetary stakes, the industry argues that the rule pertains exclusively to gambling and betting—not to games of skill such as rummy, poker, and fantasy sports.
On Tuesday, a Supreme Court bench comprising Justices J.B. Pardiwala and R. Mahadevan reviewed the exhaustive list of petitioners, which included online gaming platforms, casino operators, and lottery companies. Expressing concern over the length of the proceedings, Justice Pardiwala observed, “This is a long list of petitioners. This will be a never-ending saga.” The Court, however, decided to hear all petitioners until July 17, with the government scheduled to respond from July 18 onward. The matter will be reserved for judgment on July 25.
The case is being closely watched by stakeholders across the gaming and digital entertainment industry, as the ruling could potentially reshape the legal framework governing online gaming and taxation in India.
Before the Court’s summer recess, Additional Solicitor General (ASG) N. Venkatraman had laid out a set of seven legal principles—or “sutras”—designed to clarify the scope of gambling under Indian law. He argued that the determining factor for gambling is not the type of game, but whether a financial stake is involved.
In response, senior advocate Harish Salve, representing several online gaming firms, contended that the government’s approach grossly mischaracterizes online skill-based games. He questioned whether the fees collected for participating in games like fantasy sports or online rummy could be classified as “actionable claims”—a legal term referring to enforceable claims under civil law—and thus treated as taxable goods under the GST framework.
Salve asserted that online gaming companies are simply service providers that facilitate skill-based competitions and do not offer any form of transferrable right or claim. Citing the 2006 Sunrise Associates judgment, he argued that games of skill do not generate actionable claims in the same manner as lotteries or traditional gambling.
Further, he raised constitutional concerns about the government’s interpretation of tax laws, noting that the 101st Constitutional Amendment had removed the states’ power to tax betting and gambling. According to Salve, Rule 31A represents a “colourable exercise of legislative power,” by attempting to tax skill-based gaming under the guise of gambling regulation.
The Court’s decision will have far-reaching implications for the online gaming industry, which has experienced meteoric growth in recent years. A verdict in favor of the gaming companies could solidify the legal distinction between games of skill and games of chance, providing clarity for future taxation and regulation.
With billions of rupees and the future of India’s digital gaming sector hanging in the balance, the July 25 ruling is poised to become a defining moment in the evolution of tech-driven entertainment and commerce in the country.
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