The Central Government, in its latest submission to the Supreme Court, has strongly defended its stance on taxing the full value of bets placed in online gaming, asserting that the entire stake — referred to as the “full face value” — should be treated as the taxable amount under the Goods and Services Tax (GST) regime.
Responding to arguments by online gaming platforms, which have contended that GST should apply only to their commission or platform fees, the Centre argued that the stake placed by users is fundamental to the supply of “actionable claims” — the legal term used for betting and gambling services.
In a written rejoinder filed with the apex court, Additional Solicitor General N Venkatraman clarified that the act of placing a stake is not merely incidental but integral to the transaction itself.
“For a user to participate in an online game, it is mandatory to first deposit the stake amount. The platform’s algorithm matches players based on this stake, making it a precondition for gameplay,” Venkatraman stated. “Once a stake is placed, the user is effectively receiving an actionable claim — this is the service being supplied by the gaming platform.”
The ASG further elaborated that the stake paid by players serves as the basis for determining opponents and enables the platform to deliver its core service — the game. As such, the entire amount staked by a user must be viewed as the “consideration” for the supply, making it taxable under Section 15(1) of the CGST Act, which defines transaction value.
The government has maintained this position since October 2023, when it issued a notification clarifying that a 28% GST would apply to the full-face value of bets — a move that significantly altered the tax implications for the gaming industry. Under the earlier model, GST was applied only on the platform’s earnings, such as service fees or commissions.
The gaming industry has challenged this approach, arguing that taxing the entire bet amount disproportionately inflates the tax burden. For example, if a user deposits ₹1,000, 28% GST on the full amount would result in ₹280 going toward taxes, leaving only ₹720 for actual play.
Industry stakeholders maintain that the real “supply of service” is the facilitation of the game — for which the company charges a fee — and that taxing the entire stake violates this principle.
However, the Centre has rejected this reasoning, asserting that the placement of stakes is not a passive transaction but the very basis of service delivery.
