The Supreme Court on Tuesday resumed hearings in the final arguments of the Gameskraft batch of cases challenging the imposition of 28% GST on online gaming and casinos. The matter continues before the division bench comprising Justices J.B. Pardiwala and R. Mahadevan.
Senior Advocate continued submissions on behalf of the casino industry. He argued that the levy on the face value of bets is inherently indeterminate and inconsistent with the statutory framework. He pointed out that the GST rate notification and the impugned show cause notices proceed on the assumption that casinos are providing a service, whereas Rule 31A of the CGST Rules treats actionable claims in the form of a chance to win in gambling or betting as goods. This creates a fundamental inconsistency within the legal framework.
He also brought to the court’s attention that the issue of taxation of casinos was discussed across multiple GST Council meetings. He noted that it was only in September 2023 that the entry for “gambling” was removed from the service rate notification, implying a retrospective re-characterisation of the nature of the activity. He further highlighted that Rule 31A was originally intended only for betting and gambling at racecourses, referencing the Maharashtra government’s request for clarification before the Fitment Committee.
Senior Advocate Kavin Gulati, also representing the casino industry, submitted that applying Rule 31A to casinos results in an effective tax rate exceeding the statutory limits. He argued that under Section 9 of the CGST Act, the maximum permissible GST rate is 20% for CGST and 20% for SGST, but taxing face value of bets leads to an effective burden of over 150%. Gulati criticised the lack of a proper machinery provision to calculate the face value of bets and pointed out that assessing officers have relied on arbitrary methods and assumptions in different show cause notices to derive the Gross Bet Value.
He further contended that Rule 31A is ultra vires as it overrides the key provisions of the CGST Act, including Sections 2(31), 7, 9, 15(1), and 15(5). He specifically referenced Section 2(31), which excludes security deposits from the definition of consideration, arguing that this undermines the logic of including bet amounts as consideration for tax purposes.
Another Senior Advocate also commenced his submissions, appearing on behalf of casinos operating in Goa and Sikkim. He argued that a presumptive basis of valuation, such as Rule 31A(3), cannot be applied when the actual price or consideration is known. In the case of casinos, he said, the only consideration that accrues to the operator is the Gross Gaming Revenue (GGR), the net amount retained after payouts to winners and not the total bet amounts placed by players.
He further submitted that when a bet is placed, it carries an equal chance to win or lose, and therefore the face value of the bet does not accurately reflect the value of any supply made by the casino.
