The Supreme Court on Thursday continued final hearings in the Gameskraft batch of cases concerning the levy of GST on online gaming, casinos, horse racing, and lotteries. The bench, comprising Justices J.B. Pardiwala and R. Mahadevan, dealt with two distinct categories of litigation first, matters relating to lotteries, and then arguments from the State of Karnataka in its appeal concerning banning online games for stakes. As reported yesterday, the current matters are broadly divided into five categories.
At the outset, the bench de-tagged a petition that challenged Rule 31A(2) of the CGST Rules, which imposes tax on the face value of bets in the case of lotteries. The petition also assailed the discriminatory nature of Rule 31B, which excludes online lotteries from its scope. The court directed the Union of India to file a counter-affidavit and listed the matter for hearing separately in September 2025.
Thereafter, the bench commenced hearing the appeal filed by the State of Karnataka against the 2022 judgment of the Karnataka High Court that had struck down key provisions of the Karnataka Police (Amendment) Act, 2021. The said legislation had sought to prohibit all online games played for stakes, irrespective of whether they were games of skill or chance.
Appearing for the State of Karnataka, Additional Advocate General argued that Entry 34 of List II (State List) of the Constitution which empowers States to legislate on “betting and gambling” was not limited to betting on games of chance alone. He submitted that the High Court erred in interpreting Entry 34 as covering only “betting on gambling,” which he termed as a constitutionally unsupported narrowing of the term.
He also placed emphasis on the real-world harms caused by online gaming played for money, highlighting its addictive nature and the significant social consequences that arise when such games are easily accessible. He submitted that the State has a legitimate right to take paternalistic measures in the interest of public welfare, including through a complete ban on monetised online games. According to him, such a ban qualifies as a reasonable restriction under Article 19(6) of the Constitution on the fundamental right to carry on trade under Article 19(1)(g).
In his written submissions, He also contended that even if a game may require skill, when it is repeatedly played for stakes, involving uncertain outcomes and prize incentives, it acquires the character of gambling for legislative purposes. He asserted that the repeated nature of gameplay, algorithmic variation, and commercialisation of platforms alters the nature of even skill-based games, bringing them within the State’s competence to regulate under Entry 34.
Further, the State clarified that it was not seeking to classify any particular game as gambling, but merely challenging the High Court’s broad declaration that skill games for stakes fall entirely outside the State’s power to legislate or impose tax.
Arguments on behalf of the State of Tamil Nadu also challenging Madras High Court judgments that struck down laws banning online games for stakes are scheduled to commence on Monday, 28 July 2025. Earlier this month, the Supreme Court said it would close the arguments by 25 July which now appears to have been extended.
The hearings are part of a broader set of nearly 90 cases that challenge various aspects of GST valuation, retrospective tax demands, and constitutional powers to regulate online money gaming, betting, and gambling activities in India.
