In a high-stakes courtroom session, the Supreme Court of India continued hearing one of the most pivotal tax disputes on GST on online gaming—whether online skill-based games should be taxed like gambling under the Goods and Services Tax (GST) regime. The case carries major implications, with nearly ₹2.5 lakh crore at stake.
E-Gaming Federation Challenges GST On Online Gaming
Former Solicitor General and senior advocate Harish Salve, representing the E-Gaming Federation (EGF), led the charge against the current GST interpretation. He argued that online gaming platforms are being unfairly equated with gambling operations under Rule 31A of the CGST Rules.
SC Judges Highlight Complexity of Case
During the proceedings, Justice JB Pardiwala lightened the mood with a pointed remark: ‘The fate of this litigation depends on our skill — we can’t take any chance.’ The statement underscored the central issue of the debate — distinguishing between games of skill and games of chance under tax law.
Actionable Claims and Misclassification
Salve’s argument hinges on the legal definition of ‘actionable claims.’ Citing the 2006 Sunrise Associates ruling, he emphasized that actionable claims typically involve a right to a future benefit, such as lottery winnings. Skill-based games like rummy or fantasy sports, he argued, don’t involve such claims.
‘Online platforms don’t offer guaranteed wins or transfers of rights,’ Salve stated. ‘They merely host competitions among players. That’s not gambling.’
The Flawed GST Approach
According to Salve, current tax rules treat the entire entry fee as taxable at 28%, rather than just the platform’s share, which is usually around 10% and already taxed at 18%. “Operators are being taxed on money that never reaches their accounts,” he pointed out.
He further argued that Rule 31A was designed for traditional gambling scenarios like horse racing and lotteries—not for games involving strategic decision-making and skill.
What’s at Stake for India’s Gaming Sector
The outcome of this case could redefine the future of India’s online gaming industry. A ruling that equates skill-based games with gambling could disrupt one of the country’s fastest-growing tech sectors, stifling innovation and investment.
Conclusion:
As the Supreme Court weighs one of the most consequential tax decisions in India’s digital era, the core question remains: should games of skill face the same GST treatment as games of chance? The decision could set a precedent that defines not only the future of online gaming but also how emerging digital economies are taxed and regulated in India. Opt for expert assisted GST registration today with Vakilsearch.
