Online Gaming GST at 28%: What the Supreme Court Was Told
Online gaming GST has once again taken centre stage in a legal and tax showdown.
Why 28% GST Is Applied to Online Gaming
The government’s stand is based on:
- Para 6 of Schedule III of the CGST Act, 2017
- Rule 31A of the CGST Rules, which covers valuation for actionable claims (like betting and lottery)
- Notification No. 11/2017-CTR (as amended)
- Clarification from 50th GST Council meeting (July 2023): GST at 28% applies to the full face value of bets
Gameskraft vs Union of India: The Ongoing Case
Key facts:
- Amount under dispute: ₹21,000 crore GST demand
- Gameskraft (a real-money rummy platform) claims it offers a game of skill, not gambling
- Karnataka HC quashed the tax demand in 2023, calling it “arbitrary”
- The Centre appealed to the Supreme Court, now arguing for 28% GST on entire bet amount
Legal Standpoint: What Makes It Gambling?
- The presence of money stakes, not the degree of skill, determines taxation
- Actionable claims under Entry 6 of Schedule III do not cover online games involving stakes
- This view aligns with how lotteries and betting are taxed—full value, not platform commission
Case Law Insight:
- Skill vs. chance distinction from K.R. Lakshmanan v. State of Tamil Nadu (1996) is under review
- The Supreme Court’s ruling will clarify taxation and legality of many such platforms
Industry Impact: Why This Matters
- Revenue Impact: 28% GST on gross gaming value (GGV) increases tax burden drastically
- Compliance: Platforms must register in each state, maintain detailed player records
- User Costs: Tax passed on to users, reducing winning pool and increasing platform charges
- Retrospective Risk: GST DRC-01s already issued for past dues; more may follow
Expert View: What Should Online Gaming Startups Do Now?
“Platforms must restructure their revenue models and tech systems to comply with full-value GST,” says CA R. Ganesh, a gaming tax consultant.
FAQs
Q1. Is 28% GST applicable to fantasy sports too?
Yes, if real money is involved, even fantasy games are liable under the current interpretation.
Q2. Will the final Supreme Court ruling be retrospective?
The ruling may impact ongoing appeals.
Q3. Is TDS also applicable on online winnings?
Yes, under Section 194BA (from 1 April 2023), TDS applies to net winnings at 30%.
Summary Snippet (for Google)
Centre confirms 28% GST on online gaming, calling it gambling. Applies to full bet value, says SC filing.
Final Thoughts
The Supreme Court’s upcoming verdict on online gaming GST will shape the future of India’s gaming economy. For now, platforms must gear up for higher compliance, tighter cash flows, and potential backdated liabilities.