The government has informed the country's apex court that the moment a financial stake is introduced—even in games requiring skill—the activity becomes a form of betting and gambling. This submission was made as a crucial hearing on the applicability of GST to online gaming, fantasy sports, and casinos began on Monday in the Supreme Court. The government contended that such activities fall squarely within the purview of taxable actionable claims under the Central Goods and Services Tax (CGST) Act, 2017.
A bench comprising Justices J.B. Pardiwala and R. Mahadevan is examining whether the Goods and Services Tax (GST) is lawfully applicable to online games, fantasy sports platforms, and casinos, particularly when they involve monetary stakes.
The GST department’s argument is based on the premise that once money is staked, the game—regardless of whether it involves skill or chance—enters the domain of gambling, a position previously upheld by Supreme Court judgments. Citing state laws, the revenue department has argued that state gambling statutes exempt games of skill from criminal prosecution only when played without stakes. “When stakes are involved, such games may be considered gambling,” it stated in court.
The revenue department has further submitted that the 101st Constitutional Amendment transferred taxing powers for betting and gambling to the Centre under Article 246A. It, therefore, argues that regulatory powers of the states cannot be construed as taxation powers.
The government has also stated that the 2023 amendment was merely clarificatory in nature, asserting that the power to tax actionable claims existed even before the amendment.
Abhishek A. Rastogi, founder of Rastogi Chambers and counsel for one of the petitioners before the Supreme Court, said: “If games of skill are treated as gambling solely because of monetary stakes, we risk blurring crucial legal boundaries. The decision will not just impact revenue collection, but the future of lawful, skill-based digital enterprises across India.”
The government contends that a 28% GST should apply to the total contest entry amount, effectively taxing the entire prize pool. However, gaming companies argue that GST should only be levied on their platform fees or commission, as many of these games involve skill rather than chance.