The Supreme Court on Wednesday (May 27) upheld retrospective GST demands on online gaming firms, backing the levy of 28% tax on the full face value of bets placed on their platforms.
The Court upheld the validity of the relevant provisions of the Central GST Act, corresponding State GST laws and GST Rules, including the 2023 amendments that brought online money gaming squarely within the high 28% slab on the full face value of bets.
A two-judge bench dismissed challenges mounted by online gaming companies and affirmed that even skill-based games acquire the character of betting and gambling for GST purposes once money is staked on an uncertain outcome. “Online gaming activities, including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of GST framework,” the bench said.
The judgment sets aside the Karnataka High Court’s ruling in favour of Gameskraft Technologies and restores the September 2022 show-cause notice that had demanded around ₹21,000 crore in GST retrospectively from the company. Financial Express Online reached out to Gameskraft. The report will be updated upon receiving an official statement from the company on the SC ruling.
Argument for no GST
Online real-money gaming, fantasy sports and casino operators had argued that GST should be levied only on gross gaming revenue or platform fees, in line with international practice, rather than on the entire amount staked by users.
The Supreme Court bench rejected this position, endorsing the tax department’s interpretation that the actionable claim for GST valuation is the full bet value, the Bar and Bench reported. Authorities have previously estimated aggregate GST exposure for the sector at well over ₹1 lakh crore since 2017.
All pending show-cause notices, adjudication proceedings and demands against online gaming, fantasy sports and casino operators will now be decided in accordance with the verdict and interim orders in connected matters stand vacated, the Bar and Bench report stated.
GST council’s 2023 notices to gaming companies
The dispute comes from a series of GST notices issued to real‑money gaming companies on the premise that 28% tax was payable on the entire face value of bets or contest entry amounts, rather than only on the platform fee or gross gaming revenue.
The row escalated after the GST council’s 2023 decision to levy 28% GST on the full value of online gaming, casinos and horse racing. Industry players countered that the higher levy could not be applied retrospectively for the period prior to October 1, 2023, when the new regime took effect.
Initial tax demands against the sector were pegged at about ₹1.12 lakh crore and with interest and penalties the potential exposure was projected to be far higher.