Why Gambling Triggers GST—Even If It’s a Crime
The Centre has told the Supreme Court that tax law does not distinguish between legal and illegal gambling. If you’re running a game of chance—be it online or offline—GST is applicable, regardless of whether the act itself is a crime.
This position is central to the ongoing Gameskraft vs Union of India case and could have wide-reaching implications for online gaming platforms, casinos, and even lottery operators in India.
What’s the Government’s Stand?
In its affidavit before the Supreme Court, the Union Government argued:
- GST applies on actionable claims in betting and gambling under Entry 6 of Schedule III of CGST Act,
- Legality of the transaction doesn’t exempt it from tax,
- ‘Supply’ under GST covers even illegal activities if they have economic value.
This means even if a betting activity violates another law (like the Public Gambling Act, 1867), the transaction can still be taxed under GST.
Relevant Legal Provisions
| Law/Section | Details |
|---|---|
| CGST Act – Section 7 | Defines ‘supply’ to include all forms of economic activity |
| Schedule III – Entry 6 | Actionable claims other than lottery, betting, and gambling are exempt |
| Article 265 of Constitution | No tax shall be levied or collected except by authority of law |
| SC in State of Bombay v. R.M.D. Chamarbaugwala | Held gambling is res extra commercium, but can be taxed if permitted |
GST on Gambling: Key Points
- Rate applicable: 28% on the face value or bet amount
- Not eligible for ITC: As per Rule 31A of CGST Rules
- Online platforms like Dream11, RummyCircle, etc., are under scrutiny
- No input tax credit allowed for goods/services used in providing such games
Supreme Court Case: Gameskraft
- Dispute: Whether games of skill offered by Gameskraft should be taxed as gambling
- Govt’s Claim: ₹21,000 crore GST demand
- Company Argument: Games of skill ≠ gambling
- Centre’s Rebuttal: Even skill games with stakes involve risk and chance
Next hearing is expected soon. The SC’s verdict will decide if Rule 31A (dealing with valuation of supplies in gambling) survives or falls.
Expert View:
“The distinction between skill and chance has been long debated. But from a tax lens, the minute there’s money on the table, GST comes into play.”
— Indirect Tax Consultant, Bengaluru
Practical Impact for Businesses
| If you’re a… | You must… |
|---|---|
| Online gaming platform | Register under GST, charge 28% on entry fees/stakes |
| Casino/Lottery operator | Pay GST on total ticket/bet value, no ITC allowed |
| App Developer hosting such games | Ensure compliance with place of supply rules & valuation |
| User/bettor | Bear higher cost as GST inflates ticket prices/entry amount |
FAQs
Q1. Can GST apply to illegal betting operations?
Yes, GST applies even if the activity violates criminal law. The tax law focuses on the economic transaction, not its legality.
Q2. What if I host a game of skill with prize money?
If players stake money to participate and win real prizes, GST may apply. You need to determine whether the game involves substantial chance.
Q3. Can I claim input tax credit on game development tools or ads?
No, ITC is restricted for businesses supplying lottery, betting, or gambling services.
Conclusion
The Centre’s message is loud and clear: whether a game is legal or illegal, GST won’t spare it. With lakhs of crores involved in the online gaming industry, this ruling will decide the future tax burden for platforms and users alike.
Need clarity on GST compliance for gaming or betting platforms?
Talk to our experts at Efiletax today and avoid massive tax demands later.
Summary
GST applies to gambling—legal or illegal. The Centre told SC that economic transactions in betting are taxable under GST law, regardless of legality.