The Supreme Court is set to resume hearings on July 15, 2025, in the closely watched Goods and Services Tax (GST) case involving Gameskraft and other gaming companies. The matter, which came to final hearing in May was heard for 12 days till May 22 when the Supreme Court went for summer vacations. The hearing will now tentatively resume from July 15 with the matter now reflecting in the advance cause list. The outcome carries significant implications for the online gaming, fantasy sports, casino, and horse racing sectors.
Background
The case centers around whether online games like rummy and fantasy sports are “games of skill” or “games of chance,” and whether the entire entry amount paid by players should be taxed at 28% GST. The issue gained prominence after Gameskraft Technologies Pvt. Ltd. received a ₹21,000 crore GST notice. While the Karnataka High Court quashed this notice in 2023, terming rummy as a game of skill, the Supreme Court stayed the decision and took up final adjudication. Subsequent to stay of Karnataka decision, a total 158 cases were filed with total GST claim amounting to staggering Rs. 1,53,000 crores including on offline casinos.
The GST Council had amended the law in 2023 to specifically bring online gaming (both skill and chance) under the 28% GST bracket. However, the tax authorities argue that this merely clarified existing law, not created new obligations, a position strongly contested by the gaming industry.
Key Legal Issues Raised in GST Final Hearing
Skill vs Chance
Senior counsel, representing Gameskraft, argued extensively that rummy and fantasy sports are skill-based activities. He cited long-standing Supreme Court precedents such as Chamarbaugwala, Satyanarayana, and Lakshmanan, emphasizing that placing stakes does not convert a game of skill into gambling. He highlighted that skill-based classification has been upheld repeatedly by High Courts and regulatory bodies.
Another senior counsel echoed this, arguing that the skill component remains dominant and that taxation principles should reflect this fundamental legal distinction.
Actionable Claims and Supply
He further argued that gaming platforms do not supply “actionable claims,” contending that deposits by players are kept in escrow accounts and can be withdrawn if unused. He explained that, unlike lottery tickets (which are transferable), participation rights in online games are not actionable claims.
He maintained that under the Transfer of Property Act, actionable claims refer to legally enforceable debts or beneficial interests, which do not apply to online gaming entry fees.
Another Senior counsel who appeared on behalf of two online gaming companies on the last of hearing on May 22 argued that online gaming, including gambling and betting, was classified under specific HSN codes as services. This classification existed prior to the 2023 amendment of GST laws.
He pointed out that the Customs Tariff Act, before the amendments, had no entry for actionable claims in online gaming. Gulati argued that this omission showed that such claims were not treated as goods under the law.
Validity of Rule 31A and Valuation Dispute
A major point of contention is Rule 31A(3) of the CGST Rules, which assigns the value of supply as 100% of the face value of bets. Other counsels, argued this rule was ultra vires, unconstitutional, and in violation of Section 15 of the CGST Act, which requires that valuation reflect actual transaction value.
They criticized taxing the entire deposit pool instead of the platform’s service fee (generally 5–10%), arguing that such an approach disregards economic realities and violates Article 14 (right to equality) by grouping skill and chance games under the same tax slab.
Retrospective Taxation
Another critical concern is retrospective application. He argued that the 2023 amendments introduced new definitions and obligations for the first time, contradicting the government’s claim that they merely clarified existing provisions. He warned that upholding retrospective demands could deter foreign investment and damage employment prospects in the sector.
He and other counsels pointed out that show-cause notices issued under Section 74 (fraud or suppression) are unjustified because the GST Council itself had debated these issues for years, indicating a lack of clarity rather than deliberate evasion.
Counterarguments from Government
Additional Solicitor General (ASG) N. Venkataraman argued that online gaming involves actionable claims and thus falls within the GST net. In a lighter moment during the hearings, the ASG mentioned playing on multiple gaming sites and being unable to withdraw funds without playing, to which he humorously replied that the ASG had become a “gambler for the day.”
The ASG maintained that the 2023 amendments are clarificatory and not substantive, thus validating prior notices and tax assessments.
Industry Impact – Gameskraft Supreme Court Outcome
The outcome of this case is expected to set a precedent for the entire online gaming ecosystem, including offline casinos. A ruling upholding the government’s view could result in significant tax liabilities, potentially exceeding Rs. 1,50,000 crore, and stricter regulatory compliance. Conversely, a favorable decision for the industry could offer legal clarity and encourage further investments and innovation.
Next Steps
After extensive arguments from senior counsels representing Gameskraft, the All India Gaming Federation, Federation of Indian Fantasy Sports, and others, a consolidated reply from the government is expected, after which the court will hear final rebuttals.
Conclusion
The case has become a landmark moment for India’s gaming sector, reflecting the tensions between regulatory clarity, revenue considerations, and fostering a rapidly growing digital entertainment market. All eyes will be on the court when it resumes to decide this high-stakes issue that straddles law, policy, and economic strategy of the sunrise sector.
