New Delhi: The Supreme Court of India Wednesday upheld the retrospective GST demands against online gaming companies as constitutionally valid, ruling that the question of whether gambling is a game or skill is irrelevant if money is involved.
A bench of justices J. B. Pardiwala and R. Mahadevan noted that Article 19 of the Constitution of India protects a game of skill, however, “when the element of betting and gambling enters the picture, the nature of the game ceases to be of relevance”.
The bench accepted the concerns of states—on public health and public order—noting concerns over addiction, monetary losses and suicides linked to monetary online gaming.
Setting aside a Karnataka High Court judgment in favour of online gaming platform Gameskraft, the bench restored the 2022 show-cause notice issued to it demanding Rs 21,000 crore in GST.
The court, however, clarified that the final decision in the matter was left to the concerned GST authorities and pending show-cause notices, adjudication proceedings and demands against online gaming, fantasy sports and casino operators will now be decided in line with this SC judgment.
The case arose from money gaming companies being issued GST notices demanding 28 percent tax on the full face value of bets or contest entries placed through their platforms.
The gaming apps argued before the court that GST could only be levied on gross gaming revenue—the amount retained by platforms after deducting winnings—and that taxing the entire deposit amount was disproportionate and commercially unviable.
The GST Council in 2023 imposed 28 percent GST on the full face value of online gaming, casinos and horse racing. After this, gaming companies told the court that the levy could not be applied retrospectively for the period before 1 October 2023.
Asking if online skill games played for stakes could be treated the same as betting or gambling for GST purposes, and if the 2023 amendments were merely clarificatory, and whether tax demands could be enforced retrospectively—the SC held that these amendments were clarificatory.
No fundamental rights for betting & gambling
Importantly, the court said that “since betting and gambling are treated as res extra commercium (non-commercial), no fundamental right can be claimed to carry on such activities”.
This the court said in relation to Tamil Nadu and Karnataka laws criminalising online games played for money or stakes. The Madras and Karnataka HC had repealed the laws, but today the SC upheld them.
A detailed copy of the order is awaited.
(Edited by Viny Mishra)
Also read: Bookie, bot & the ban: An insider’s view of India’s murky online gaming-betting industry