Skill or chance? India’s GST ruling may reshape gaming
The Supreme Court of India is set conclude hearings on 25 July 2025, in the Goods and Services Tax (GST) case involving Gameskraft Technologies and over 150 other gaming companies. With tax claims exceeding ₹1.53 lakh crore ($18.4 billion), the case is expected to shape the future of taxation and regulation for online gaming, fantasy sports, 바카라s, and horse racing in India.
Here’s a breakdown of how the case unfolded and what’s at stake for the industry.
Gameskraft and the GST notice
The case originally drew attention after Gameskraft Technologies received a ₹21,000 crore GST notice in 2022. The Directorate General of GST Intelligence alleged that Gameskraft had evaded tax by misclassifying games like rummy as games of skill. In 2023, the Karnataka High Court quashed the notice, ruling that rummy is a game of skill and not gambling.
However, the stayed the High Court’s judgment and took over the matter for final adjudication. The hearings, which began in May 2025, continued for 12 days until 22 May. Following the stay, tax authorities filed 158 similar cases, with total claims exceeding ₹1.53 lakh crore, including assessments against offline 바카라s.
Legal questions at the heart of the case
The case revolves around several key legal issues:
- Are games like rummy and fantasy sports classified as games of skill or games of chance?
- Do player entry fees constitute actionable claims or taxable services?
- Should tax be applied to the total value of entry fees or just the platform’s commission?
- Can the 2023 GST amendments be applied retrospectively to earlier transactions?
Skill vs chance: defining the nature of games
A central question is whether games like rummy and fantasy sports are “games of skill” or “games of chance.” Senior counsel Dr. Abhishek Manu Singhvi, representing Gameskraft, argued that rummy and fantasy sports are skill-based and that the presence of stakes does not make them gambling.
Former Solicitor General of India, Harish Salve, appearing for another platform, stated that skill remains the dominant factor and should influence how such games are taxed. He pointed out that many High Courts and regulatory bodies have already classified these games as skill based.
Actionable claims and nature of supply
Salve further argued that participation in online games does not amount to the supply of actionable claims. He explained that deposits are held in escrow accounts and can be withdrawn if unused. Actionable claims, under the Transfer of Property Act, refer to legally enforceable debts or beneficial interests, which do not apply to online entry fees.
Senior counsel Tarun Gulati added that even before the 2023 amendments, online gaming was classified as a service under the Harmonised System of Nomenclature (HSN) codes. He noted that the Customs Tariff Act did not list online gaming as actionable claims, reinforcing the argument that such entries were not treated as goods under the law.
Disputed valuation method
Rule 31A(3) of the CGST Rules has been challenged by several counsels. The rule prescribes 100 percent of the face value of bets as the value of supply. Salve, along with Arvind Datar and Dhruv Mehta, argued that this rule contradicts Section 15 of the CGST Act, which mandates valuation based on actual transaction value.
They said taxing the entire player deposit rather than the platform fee, usually 5 to 10 percent, does not reflect economic reality. It also violates Article 14 of the Constitution by grouping skill-based games with games of chance under the same tax slab.
Retrospective tax demands
Another key concern raised is the retrospective application of the 2023 GST amendments. Datar argued that the amendments introduced new definitions and obligations and applying them to past transactions is unjustified. He said such a move could negatively impact investor confidence and job creation in the sector.
Singhvi and others also criticised the use of Section 74 of the CGST Act to issue show-cause notices for fraud or suppression. They pointed out that the GST Council itself had debated the issue for years, which indicates confusion in law rather than wilful tax evasion. As for the retrospective tax demands, corporate lawyer Divya Sharma told SiGMA News that this was troublesome. “The valuation method adopted by the tax authorities is unreasonable,” Sharma said.
“The full-face value of bets does not belong to gaming companies but is redistributed among players. Additionally, the imposition of a 28 percent GST disregards the historical distinction between games of skill and games of chance, which has long guided regulatory frameworks.”
– Divya Sharma, corporate lawyer
Sharma identified key legal challenges for gaming firms, including contesting the retrospective application of the tax and reasserting constitutional protections for skill-based games.
Government’s arguments: online gaming is gambling
Additional Solicitor General N. Venkataraman, representing the government, maintained that online gaming platforms offer actionable claims and therefore fall under GST. He asserted that the 2023 amendments did not change the law but only clarified it, validating prior tax notices and assessments.
During the hearings, Venkataraman, shared his own experience of not being able to withdraw money without playing on several gaming platforms. In response, Singhvi remarked that Venkataraman, had become a “gambler for the day,” drawing laughs in the courtroom.
Venkataraman emphasised that even skill-based games could involve chance, and the entire stake paid by the player forms part of the taxable supply.
Final hearing date set in gaming GST case
A division bench of the Supreme Court, comprising Justices J.B. Pardiwala and R. Mahadevan, had confirmed that arguments from petitioners representing online gaming firms, 바카라s, and lottery operators would be heard until 17 July. The union government began presenting its rejoinder arguments on 18 July. The bench is expected to reserve its judgment on 25 July which will also mark the conclusion of the hearings.
“This is a long list of petitioners; this will be a never-ending saga,” Justice Pardiwala remarked, reacting to the extensive number of industry players involved. He directed that the court proceed efficiently to hear all arguments within the scheduled window.
What’s at stake for India’s gaming sector
- Massive tax liabilities: A ruling in favour of the government could result in tax demands totalling over ₹1.53 lakh crore across the industry.
- Criminal investigations: Companies may face legal scrutiny, penalties, and compliance challenges.
- Investor confidence: A verdict upholding retrospective taxation could impact funding, expansion, and hiring in India’s gaming and tech space.
- Legal clarity: An industry-favourable ruling may establish clearer regulatory standards for skill-based games and services.
The ruling will likely set a precedent for how both online and offline gaming services are taxed under GST in India. If the court upholds the government’s view, gaming companies could face massive tax demands, tighter regulations, and possibly criminal investigations. A favourable decision for the industry, on the other hand, could provide legal clarity and regulatory certainty. It could also help attract more investment in the gaming and tech space, currently seen as a major employment generator.
