SC Verdict May Hike Tax Burden on OTT & Gaming Platforms
The Supreme Court’s recent judgment on Rule 31A of CGST Rules has stirred the waters for digital economy players. OTT platforms and gaming apps may face a higher tax burden as the verdict strengthens the government’s position on treating online gaming and similar platforms as “actionable claims” akin to betting.
Let’s decode the verdict, its GST implications, and what businesses should prepare for.
What Did the Supreme Court Say?
In the landmark ruling in the Gameskraft case (2025), the SC upheld the constitutional validity of Rule 31A, effectively allowing GST to be levied at 28% on full face value of bets placed on online gaming platforms, including games of skill and chance.
Key takeaways:
- Online gaming is taxable at 28% under GST laws, as per Finance Act 2023 amendments.
- Full bet amount (not just platform fee) is the base for tax.
- This overrides earlier High Court reliefs, such as the Karnataka HC order that quashed ₹21,000 crore GST demand on Gameskraft.
Why OTT and Streaming Platforms Should Be Concerned
While the ruling was in a gaming context, OTT platforms offering monetized engagement tools like:
- In-app contests
- Paid rewards
- Interactive polls with entry fees
…could come under scrutiny if their model resembles a “game of chance” or “betting-like structure”.
GST Rule 31A Explained
| Clause | Scope | Applied On | GST Rate |
|---|---|---|---|
| Rule 31A(2) | Actionable claims in betting, gambling, lottery | Face value of the bet | 28% |
| Rule 31A(3) | Distribution of prize money by distributor/seller | Gross ticket price | 28% |
As per the SC verdict, even games of skill with stakes may fall within this rule if monetization models mimic gambling elements.
How This Affects Your Tax Liability
For Online Gaming Apps:
- Must now register under GST regardless of turnover
- Mandatory 28% GST on total bet amount
- No set-off even if the game is of skill
For OTT Platforms (if applicable):
- Monetized features with reward-based mechanics must be evaluated
- Risk of reclassification under betting/gambling
- GST audit exposure may increase
Legal References
- Supreme Court Judgment: Gameskraft Technologies Pvt Ltd vs Union of India (2025)
- CGST Act Amendments (2023): Entry 6 of Schedule III excluded actionable claims except betting, gambling, lottery
- Rule 31A of CGST Rules, 2017
Expert View
“Platforms must reassess their monetization models. Even if you’re not in gaming, if your app charges for participation and offers rewards, you may fall within GST’s net,”
— Ravi Nair, GST & Tech Law Advisor
What Should You Do Now?
- Review platform features for any bet-like models
- Consult a GST expert to understand risk of reclassification
- Ensure compliance with registration, valuation, and invoicing under amended GST laws
- Keep watch for CBIC FAQs or further clarifications expected post this SC ruling
Summary
The SC verdict in the Gameskraft case upheld GST on online gaming at 28% of full bet value. OTT and gaming platforms with monetized engagement models may now face increased scrutiny under Rule 31A. Platforms should evaluate GST exposure and ensure compliance.
FAQs
Q1. Does this ruling apply to all apps?
No. It primarily targets gaming apps but OTT platforms with reward-based models may also be affected.
Q2. Can games of skill be taxed like gambling?
Yes, if there’s staking of money and chance elements involved.
Q3. What if my platform doesn’t charge users?
Free-to-use platforms aren’t liable under Rule 31A unless they monetize via bet-like structures.
Final Words
The SC ruling on Rule 31A is a wake-up call for digital platforms. With the line between gaming and engagement-based monetization blurring, GST exposure is rising. Stay compliant, stay ahead.