The Supreme Court has reserved its judgment in the ₹2.5 lakh crore GST dispute involving leading online gaming companies and casinos, a case that could redefine taxation on games of skill and chance in India. The verdict is expected to settle years of legal uncertainty in the RMG industry.
New Delhi: On August 12, in what could become a landmark moment for India’s fast-growing online real money gaming (RMG) industry, the Supreme Court on Tuesday reserved its verdict in a high-profile case about whether Goods and Services Tax (GST) should apply to online games.
This decision will have a direct impact on a massive Rs 2.5 lakh crore tax dispute — one of the largest in the country’s legal history.
The case was heard by a two-judge bench of Justices J.B. Pardiwala and R. Mahadevan, who concluded the final round of arguments in multiple connected matters.
These cases involve some of the biggest names in the Indian gaming sector, including Gameskraft, Delta Corp, and members of industry bodies such as the All India Gaming Federation (AIGF), E-Gaming Federation (EGF), and the Federation of Indian Fantasy Sports (FIFS).
The Union Government has been given two weeks to file a supplementary set of submissions in the matter.
At the end of the hearing, Justice Pardiwala and Justice Mahadevan expressed their gratitude to all the lawyers for their assistance. Interestingly, the final hearing in this high-stakes GST gaming case coincided with Justice Pardiwala’s birthday.
Senior advocates Arvind Datar, Dr. Abhishek Manu Singhvi, Gopal Sankaranarayanan, Tarun Gulati, Balbir Singh, and C. Aryama Sundaram presented their final rejoinders before the court.
During his submissions, senior advocate Gopal Sankaranarayanan stressed that the constitutional phrase “Betting & Gambling” — as explained in earlier landmark Supreme Court rulings in the RMDC cases — applies only to games of chance and not to games of skill.
He said,
“If the Revenue wishes to include games of skill in that phrase, the RMDC rulings would have to be referred to larger benches.”
His note also highlighted that both RMDC Constitution Bench rulings dealt with tax laws, which, according to him, weakens the government’s argument that skill-gaming judgments do not apply to taxation.
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He said,
“No judgment has ever said ‘Gaming is nothing but Gambling’ — in fact, K.R. Lakshmanan says the opposite.”
The Revenue’s move to categorise online rummy stakes as “actionable claims” — and therefore taxable as goods — was also strongly opposed. The submissions referred to the Transfer of Property Act to explain that money becomes an actionable claim only when it is a debt that is still unpaid.
According to the argument,
“Until there is a refusal to pay, there is no actionable claim,”
adding that GST’s own definition of “services” clearly includes activities related to the use of money.
The submissions agreed that “wagering” contracts include betting and gambling but emphasised that such contracts are unenforceable under Section 30 of the Indian Contract Act, except in the case of horse racing. The counsel accused the Revenue of picking only the parts of the law that suited its argument.
In the context of casinos, the submissions referred to GST Council discussions and the newly introduced Rules 31-B and 31-C, pointing out that these were added only in 2023 and do not mention Rule 31A.
The note argued,
“The fact that show cause notices were issued days before these new rules took effect raises doubts about a colourable exercise of power.”
It also rejected the government’s use of the concept of “House Advantage” — used to calculate the value of casino bets — calling it
“a notional figure with no legal or factual basis”
and denying that casinos operate by matching bets in the way the government has alleged.
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Finally, the submissions urged the Supreme Court to dismiss the government’s special leave petitions and allow the writ petitions filed by online skill gaming platforms. This would, in effect, quash the massive tax demands against them.
