LATEST GST CASE LAWS: 01.06.2026
🔥📛 AAAR: Compostable plastic bags taxable at 5%, conditional on biodegradability; Upholds AAR ruling
➡️ The Rajasthan AAAR upheld the AAR ruling that the bags manufactured by Easy Flux Polymers Pvt. Ltd. are classifiable under Chapter 39 as plastic bags and articles of plastics, making them generally liable to the GST rate applicable to plastic bags unless they specifically qualify for the concessional treatment provided under the relevant notification.
➡️ AAAR interpreted Serial No. 319 of Notification No. 09/2025-Central Tax (Rate) to mean that the concessional GST rate of 5% is available only to paper sacks/bags and bio-degradable bags falling under Chapters 39 or 48. Consequently, non-paper bags can claim the benefit only if they are demonstrably bio-degradable; otherwise, the normal GST rate applicable to plastic bags would apply.
➡️ The authority held that determining whether a product is bio-degradable or compostable is a technical and scientific exercise that falls within the jurisdiction of specialized agencies such as the Pollution Control Board under the Plastic Waste Management Rules. Advance ruling authorities are not empowered to adjudicate compliance with environmental or scientific standards relating to bio-degradability.
➡️ AAAR expressed reservations about the evidentiary value of the test reports submitted by the appellant, noting that the samples were drawn by the taxpayer itself and the sampling methodology was not independently verified. It further observed that since GST benefit depends on the continuing characteristics of the product, a one-time certification may not be sufficient to establish ongoing eligibility for concessional tax treatment.
➡️ Rejecting the appellant’s contention that CPCB/CIPET certifications conclusively establish eligibility, AAAR reaffirmed that advance ruling authorities can only interpret GST law within the scope of Section 97(2) of the CGST Act and cannot conclusively determine bio-degradability. It clarified that the jurisdictional GST authorities may draw samples and obtain testing through competent agencies to determine whether the products qualify for the concessional rate under Entry No. 319.
✔️ Rajasthan AAAR – In the matter of Easy Flux Polymers Private Limited [ORDER NO. 01/2026-27]
🔥📛 AAR: Foreign director’s commission taxable as import of services; Overseas marketing agents “intermediary”, no GST leviable
➡️ The Tamil Nadu AAR held that GST under reverse charge is payable on the 15% commission paid to a Swiss-resident director for marketing activities and sourcing export orders, even though he owns 99% of the company, does not draw a separate salary, and receives only commission linked to the FOB value of orders procured.
➡️ Applying the definition of “import of services” under Section 2(11) of the IGST Act, the AAR observed that the service provider (director) is located outside India, the recipient company is located in India, and under Section 13(2), the place of supply is the recipient’s location in India; therefore, the services qualify as imported services.
➡️ The AAR clarified that the commission paid to the director is consideration for services rendered to the company and not merely a payment arising from his ownership interest. Consequently, the company is liable to discharge GST under reverse charge in terms of Notification No. 10/2017-Integrated Tax (Rate).
➡️ In contrast, commission paid to foreign marketing agents for procuring export orders was held not liable to GST under reverse charge. The AAR classified such agents as intermediaries because they merely facilitate the sourcing of orders and are neither directors nor employees of the applicant.
➡️ Regarding clearing and forwarding services performed abroad by foreign agents, the AAR held that such agents provide logistics services on their own account and are not intermediaries. Since these services satisfy the conditions of “import of services,” the recipient in India is required to pay GST under reverse charge on the charges paid to overseas C&F agents under Notification No. 10/2017-Integrated Tax (Rate).
✔️ Tamil Nadu AAR – In the matter of Sampurnam Hosieries Impex Private Limited [Advance Ruling No. 43 /ARA/2026]
🔥📛 SC: Online skill games played for stakes lose Article 19 shield; States can impose total ban
➡️ The Supreme Court held that Entry 34 of List II confers broad legislative power on States over “betting and gambling”, and this power is not confined to games of chance alone. States are constitutionally competent to regulate or prohibit games of skill when played for money stakes, and any interpretation that restricts Entry 34 only to games of chance unduly narrows the legislative field granted by the Constitution.
➡️ Reversing the approach adopted in the Madras and Karnataka High Court decisions, the Court upheld the validity of the Tamil Nadu and Karnataka amendments that prohibited online games involving stakes irrespective of whether the underlying game is one of skill or chance. The Court found that the High Courts incorrectly limited the scope of Entry 34 and failed to appreciate the wider constitutional authority available to States.
➡️ Examining the Constituent Assembly Debates and earlier precedents, the Court clarified that the framers never intended to exclude skill-based games from regulation when money is wagered. While a game of skill may not itself constitute gambling, betting or wagering on such a game can still fall within the ambit of “betting and gambling”, and therefore remains subject to State legislation under Entry 34.
➡️ The Court rejected the interpretation that “betting and gambling” in Entry 34 means only “betting on gambling”. It held that constitutional entries must receive a broad and liberal construction, and reading the conjunction “and” in a restrictive manner amounts to rewriting the constitutional text. The Court further clarified that earlier decisions such as RMDC and K.R. Lakshmanan did not conclusively determine the scope of “betting” or restrict State power only to activities involving games of chance.
➡️ The Court held that wagering or betting on games of skill does not enjoy protection under Article 19, even if the underlying game itself may be a legitimate business activity. Since betting and gambling are activities that can be treated as extra commercium, States may impose complete prohibitions without violating the test of proportionality. The judgment also recognised that States may rely on related legislative fields such as public order, police and public health, noting the social harms associated with online money gaming, including addiction, financial distress and threats to public welfare.
✔️ SC – State of Tamil Nadu and Ors. vs Junglee Games India Private Limited and anr. [C.A. No. 6124-6131/2023]
🔥📛 SC: Stakes on uncertain outcomes render online-gaming taxable actionable claims; Valuation must conform to Rules
➡️ The Supreme Court held that for GST purposes, the decisive factor is the staking of money or money’s worth on an uncertain future outcome. Once participants place stakes with the expectation of winning, the transaction assumes the character of betting and gambling irrespective of whether the underlying activity is predominantly a game of skill or chance. Consequently, the traditional distinction between games of skill and games of chance, relevant in gambling regulation, does not determine GST liability.
➡️ The Court ruled that the taxable event under GST is the supply of actionable claims arising from betting and gambling transactions, not the legal classification of the underlying game under penal laws. It clarified that online gaming participants acquire contingent beneficial interests in pooled prize money, creating actionable claims, and that such claims relating to betting and gambling are expressly taxable under the CGST framework. Parliament’s power under Article 246A to tax these supplies was upheld in full.
➡️ Rejecting the contention that online gaming platforms merely facilitate transactions between players, the Court held that operators themselves are suppliers of actionable claims because they control the entire gaming ecosystem, including player onboarding, stake collection, gameplay management, winner determination, and payout mechanisms. GST liability therefore arises upon the placement and appropriation of stakes for participation, and not merely on ancillary facilitation services provided by operators.
➡️ The Supreme Court upheld the constitutional validity of Sections 2(31), 2(52), 7, 9 and 15 of the CGST Act, confirming that actionable claims can validly be treated as goods within the GST framework. It clarified that the GST regime is centred on the concept of “supply” and is not restricted by earlier notions of sale of goods. The Court further held that Article 366(12A) does not limit Parliament’s ability to define taxable supplies and that fiscal measures cannot be invalidated merely because they increase tax incidence or affect business profitability.
➡️ On valuation, the Court upheld Rule 31A and the 2023 amendments, including Rules 31B and 31C, as valid, clarificatory and retrospective. It held that the entire stake amount constitutes consideration and taxable value, with no statutory basis for excluding prize pools, winnings or payouts. The Court also confirmed that valuation rules for betting, gambling, online gaming, fantasy sports and casinos are machinery provisions designed to ensure certainty and uniformity, while leaving the correctness of specific tax computations open to examination by adjudicating authorities in individual cases.
✔️ SC – Directorate General of Goods and Services Tax Intelligence (HQS) and Ors. vs Gameskraft Technologies Private Limited and ors. [SLP(C) No. 019366 – 019369 of 2023]
🔥📛 AAR: Proceedings pending before GST authority bars advance ruling admissibility on hotel-construction ITC-admissibility
➡️ The West Bengal AAR rejected the advance ruling application under the proviso to Section 98(2) of the CGST Act, holding that it cannot admit an application when the same issue is already pending before a GST authority in proceedings under the Act.
➡️ The applicant had sought a ruling on the admissibility of input tax credit (ITC) under Sections 16 and 17(5)(d) on works contract services and other inputs used for constructing a hotel building, restaurant, banquet facilities and related infrastructure intended to be used exclusively for taxable outward supplies.
➡️ The Authority noted that the State GST enforcement wing had already initiated inspection and enforcement proceedings after detecting substantial ITC accumulation without corresponding outward supplies, and had directed reversal of the credit by treating it as blocked credit under Section 17(5)(d).
➡️ Since the applicant was aware of the ongoing enforcement proceedings and filed the advance ruling application thereafter, the AAR held that the question raised in the application was already pending before the jurisdictional authority, thereby attracting the statutory bar under Section 98(2).
➡️ The AAR further observed that the applicant incorrectly represented that no proceedings on the issue were pending and stated that, had the true facts been disclosed at the admission stage, the application would have been rejected immediately after hearing; consequently, the application was rejected as not maintainable.
West Bengal AAR – In the matter of Sky Height Enclave Pvt Ltd [WBAAR 35 of 2025-26]
