Fantasy Sports Liable to GST as Skill Element Does Not Remove Uncertainty in Outcome: SC

SC: Once money is staked on uncertain outcomes, the skill-versus-chance distinction loses significance; online gaming constitutes a taxable actionable claim

The Supreme Court in Directorate General of Goods & Services Tax Intelligence (HQS) & Others v. Gameskraft Technologies Private Limited and Others examined multiple appeals, writ petitions, and transferred cases concerning the GST treatment of online gaming, fantasy sports, betting, gambling, and casino transactions. The central issue was whether activities involving staking money on uncertain outcomes constitute betting and gambling and whether actionable claims arising from such activities are taxable under the GST framework. The Court held that once money or money’s worth is staked on an uncertain outcome with the possibility of gain or loss, the activity acquires the character of betting and gambling irrespective of whether skill is involved. It ruled that actionable claims arising from betting and gambling are validly included within the GST net, treated as goods under the CGST Act, and taxable supplies under the statutory scheme. The Court upheld the constitutional validity of the relevant CGST provisions, valuation rules, and the 2023 amendments, rejecting challenges against them. It further held that GST is payable on the entire stake amount as prescribed under the valuation framework and not merely on platform fees or commissions.

Facts:

• The present appeals, at the instance of the Revenue, arise out of a common judgment and order dated 11.05.2023 passed by the High Court of Judicature of Karnataka at Bengaluru in Writ Petition Nos. 19570 of 2022, 19561 of 2022, 20119 of 2022 and 20120 of 2022, whereby the High Court allowed the writ petitions and quashed the show cause notices dated 23.09.2022 issued by the Directorate General of GST Intelligence under Section 74(1) of the Central Goods and Services Tax Act, 2017. The said notices proposed recovery of allegedly short-paid or unpaid GST, together with interest and penalty, on the premise that the assessees had deliberately evaded substantial tax liability in respect of supplies relating to betting by misclassifying such supplies as services instead of actionable claims.

Civil Appeal No. 8240 of 2024 [P Z Skill Games (OPC) Private Limited v. State of Maharashtra]

• The appellant is engaged in the business of developing software, computer games, virtual reality games, and sports-based games, and also acts as a service provider. It sought to launch an online skill-based gaming platform and, for that purpose, applied to the respondent for the requisite permission. As no decision was taken on its application, the appellant filed Writ Petition No. 13138 of 2023 seeking a direction to grant a licence. By judgment dated 04.01.2024, the High Court of Bombay disposed of the writ petition by directing the appellant to pursue its remedies before the State Government or avail appropriate alternative remedies. Despite the same, no action was taken by the respondent authorities on the appellant’s application. Aggrieved by the inaction, the appellant has approached this Court by way of the present appeal.

Criminal Appeal No. 2933 of 2026 [State of Maharashtra and Others v. Gurdeep Singh Sachar and Others]

• Respondent No. 1 had filed Criminal Public Interest Litigation Stamp No. 22 of 2019, seeking initiation of criminal proceedings against Respondent No. 3, Dream 11 Fantasy Private Limited, alleging that it was conducting illegal betting / gambling under the guise of online fantasy sports and evading GST in violation of the CGST Act, 2017 and Rule 31A of the Central Goods and Services Tax Rules, 2017. By judgment dated 30.04.2019, the High Court of Bombay dismissed the PIL by observing that success in Dream 11 fantasy sports contests, depends predominantly on skill, involving user’s knowledge, judgment and attention, and is not dependent on chance or the outcome of any particular realworld match. It was thus concluded that the activity constitutes a game of skill, not gambling, rendering the allegations untenable. Aggrieved thereby, the appellants (original Respondent Nos. 2, 4 and 5 in the PIL) have preferred the present appeal.

W.P (C) No. 1374 of 2023 [E-Gaming Federation and another v. Union of India and others]

• Petitioner No. 1 is a federation of stakeholders in the online gaming industry. Petitioner No. 2 operates an online platform offering games of skill such as rummy and fantasy sports. According to the petitioners, prior to 01.10.2023, the petitioners classified their activity as services (SAC 998439) and paid GST @ 18% on the platform fee alone, treating it as the sole consideration. The prize pool was not taxed as it did not accrue to the platform. Pursuant to the CGST (Amendment) Act, 2023, actionable claims relating to online gaming were brought within the tax net, and Rule 31B prescribed valuation based on total player deposits. The petitioners have since complied with the amended regime. However, a show cause notice dated 29.09.2023 was issued for the period 01.07.2017 to 31.03.2022 alleging misclassification, treating the activity as “betting and gambling” (actionable claims / goods), and demanding GST on the entire stakes instead of platform fee. Aggrieved thereby, the petitioners have invoked the jurisdiction of this Court under Article 32 of the Constitution of India, seeking the reliefs inter alia, (i) To declare Section 9(1) read with Section 2(52) of the CGST Act, 2017 insofar as it imposes tax on actionable claims, as unconstitutional, being beyond the legislative competence of Parliament (ii) To declare Rule 31A of the CGST Rules, 2017 as unconstitutional, being beyond the legislative competence of Parliament, ultra vires the CGST Act, 2017 and violative of Articles 14 and 19(1)(g) of the Constitution of India (iii) To quash the show cause notice dated 29.09.2023 issued to Petitioner No. 2.

W.P (C) No. 1384 of 2023 [Play Games 24 x 7 Private Limited and Others v. Union of India and Others]

• Petitioner No. 1 is engaged in providing platforms for games of skill through web and mobile-based technologies, including rummy and fantasy sports relating to cricket, football, and other sports. Petitioner Nos. 2 to 4 are its employees. A showcause notice dated 27.09.2023 was issued to Petitioner No. 1 for the period 25.01.2018 to 31.03.2023 alleging that it is a supplier of actionable claims in the nature of betting and gambling, and is therefore liable to GST accordingly. Aggrieved thereby, the petitioners have invoked the jurisdiction of this Court under Article 32 of the Constitution of India, seeking reliefs identical to those sought in W.P.(C) No. 1374 of 2023.

W.P. (C) No. 268 of 2024 [M/s. Baazi Networks Private Limited & Others v. Union of India and Others]

• Petitioner No. 1 operates an online platform offering skill-based poker games with monetary stakes. Petitioner No. 1 did not register under the service tax regime for the period 2014-15 to 2016-17. Upon investigation by Respondent No. 3, it discharged the entire service tax liability along with interest and penalty. Despite the same, a show cause notice dated 30.09.2023 was issued demanding GST, interest and penalty. Personal penalties were also imposed on Petitioner Nos. 2 to 6 (Directors). Aggrieved, the petitioners have preferred this writ petition, seeking inter alia (i) quashing of the show cause notice dated 30.09.2023 issued by Respondent No. 3; (ii) striking down of Section 15(5) of the CGST Act, 2017 as unconstitutional and violative of Articles 246A and 366(12) of the Constitution of India and Section 15(1) of the CGST Act, 2017; (iii) striking down of Rule 31A(3) of the CGST Rules, 2017 as ultra vires Sections 2(31), 7, 9 and 15 of the CGST Act, 2017; (iv) restraining the respondent authorities from taking any coercive action against the petitioners; and (v) restricting the concerned Respondent from adjudicating the show cause notice pending final disposal of this writ petition.

W.P. (C) No. 50 of 2025 [Golden Peace Infrastructure Pvt. Ltd. and another v. Assistant State Tax Officer, Goa and another]

• Petitioner No. 1 is a licensed casino operator in Goa. On 06.08.2024, the respondents issued a show cause-cum-demand notice under Section 74 of the CGST Act, 2017 and corresponding SGST Act, to the petitioners demanding a sum of Rs. 38,55,62,100/- of which a sum of Rs. 17,73,88,698/- was for alleged short / non-payment of GST. Aggrieved, the petitioners have preferred this writ petition seeking the following reliefs: (i) quashing of the show cause notice dated 06.08.2024 issued by Respondent No. 1 to Petitioner No. 1; (ii) striking down of Section 15(5) of the CGST Act, 2017 as unconstitutional and violative of Articles 246A and 366(12) of the Constitution of India and Section 15(1) of the CGST, 2017; (iii) striking down of Rule 31A(3) of the CGST Rules, 2017 as ultra vires Sections 2(31), 7, 9 and 15 of the CGST Act, 2017; (iv) restricting Respondent No. 1 from taking any coercive action against the petitioners; and (v) restricting respondent authorities from adjudicating the show cause notice pending disposal of this writ petition
• Similar writ petitions, namely, WP (C) Nos. 300 of 2024, 350 of 2024, 378 of 2024, 429 of 2024, 447 of 2024, 456 of 2024, 541 of 2024, 646 of 2024, 720 of 2024, 858 of 2024, 51 of 2025, 52 of 2025, 217 of 2025, 258 of 2025, 406 of 2025, 412 of 2025, 467 of 2025, 673 of 2025, 692 of 2025, 732 of 2025, 880 of 2025, 923 of 2025, 1032 of 2025, 1098 of 2025, 1171 of 2025, 1251 of 2025, and 265 of 2026 have also been filed challenging the show cause notices issued by the respondent authorities and assailing the constitutional validity of certain provisions of the CGST Act, 2017 and the Rules framed thereunder.
• P. (C) Nos. 545 of 2024, 568 of 2024, and 605 of 2024 have been filed under Article 32 of the Constitution of India challenging the orders passed by the respondent authorities confirming the differential GST liability, together with applicable interest and penalty for the relevant tax periods, and also questioning the constitutional validity of certain provisions of the CGST Act, 2017 and the CGST Rules, 2017.
• Pursuant to the order dated 05.04.2024 passed by the Supreme Court in Union of India and Others v. Deltatech Gaming Limited and Others, Transfer Petition (Civil) Nos. 755–781 of 2024, a large number of matters pending before various High Courts across the country were transferred to the Supreme Court. These included Transferred Case (C) Nos. 24 to 54 of 2024, arising from proceedings pending before the High Courts of Calcutta, Sikkim, Gujarat, Rajasthan, Karnataka, Bombay, Madhya Pradesh, Punjab & Haryana, Delhi and Allahabad. Specifically, the transferred matters comprised TC(C) Nos. 24, 25, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 51, 52, 53 and 54 of 2024, all raising substantially similar questions concerning the GST treatment of online gaming, betting, gambling, fantasy sports and casino transactions.
• Reliefs Sought in the Transferred Cases –The Court observed that a detailed discussion of the prayers in each transferred case would unnecessarily burden the judgment and, therefore, consolidated the reliefs sought. Broadly, the petitioners sought a declaration that Section 9(1) read with Section 2(52) of the CGST Act and corresponding SGST provisions, insofar as they impose GST on actionable claims, are unconstitutional and beyond legislative competence. They also challenged Section 15(5) of the CGST Act as being ultra vires Articles 246A and 366(12) of the Constitution and Sections 15(1) and 15(2) of the Act. Further, they sought declarations that Rule 31A(3) of the CGST Rules and corresponding SGST Rules are unconstitutional, violative of Articles 14, 19(1)(g), 246A and 265 of the Constitution and ultra vires the parent enactments. The petitioners also challenged the validity of Rule 31A, various GST circulars, notifications and clarifications, including Circular No. 27/01/2018-GST dated 04.01.2018, Circular No. 354/107/2017-TRU dated 04.01.2018, Notification No. 11/2017-Central Tax (Rate), Notification No. 6/2018-Central Tax (Rate), and corresponding State notifications. The petitioners further sought a declaration that the levy of GST on betting and gambling under the CGST and SGST enactments is ultra vires the Constitution, quashing of the impugned show cause notices, a declaration that GST is payable only on the commission retained or set apart by the operators and not on the total value of bets contemplated under Rule 31A(3), and consequential directions restraining the authorities from relying upon Rule 31A(3), proceeding with assessments based thereon, or taking coercive steps pursuant to the impugned show cause notices.

Issues:

• Whether online gaming activities, including fantasy sports and other games played on digital platforms involving staking upon uncertain outcomes, constitute betting and gambling under the GST framework?
• Whether the provisions of the CGST Act, 2017, corresponding State GST enactments and Rules, insofar as they subject actionable claims arising from betting and gambling to GST, are constitutionally valid and within the legislative competence under Articles 246A and 366(12A)?
• Whether actionable claims arising from betting and gambling fall within the ambit of “goods” and constitute taxable supplies under the CGST Act, and whether their inclusion within the definition of “goods” under Section 2(52) is constitutionally and statutorily valid?
• Whether supply of actionable claims arising out of betting and gambling under Section 7 of the CGST Act is confined only to transfer of pre-existing actionable claims or extends to organised betting and gambling arrangements giving rise to actionable-claim interests?
• Whether “consideration” for the supply of actionable claims arising from betting and gambling transactions is validly valued under Section 15 read with the applicable valuation Rules?
• Whether Rule 31A of the CGST Rules, 2017 is intra vires the CGST Act and the delegated rule-making power under Sections 15 and 164, and whether the valuation mechanism prescribed therein is violative of Article 14 or suffers from manifest arbitrariness?
• Whether the amendments introduced in 2023, including the amendments to Entry 6 of Schedule III and insertion of Rules 31B and 31C, are clarificatory and retrospective in operation, and whether Rule 31B is violative of Article 14?
• Whether, in the online gaming framework including fantasy sports platforms, actionable-claim interests arising from betting and gambling arrangements are supplied through the organised gaming structure itself, and whether online gaming operators constitute suppliers of such actionable claims?
• Whether, in light of the 2023 amendments, the valuation of online gaming and fantasy sports is required to be determined in accordance with Rule 31B, including in relation to pending proceedings and demands?
• Whether, in light of the 2023 amendments, the valuation of casino transactions is required to be determined in accordance with Rule 31C, and whether the Department was justified in resorting to Rule 31 and best-judgment methodologies under the pre-amendment framework?
• Whether the impugned show cause notices, adjudication proceedings, valuation methodologies and consequential demands raised against online gaming operators, fantasy sports platforms and casinos are sustainable in law?

Observations:

 (i) Betting and Gambling-

• The Court commenced its analysis by observing that the fundamental controversy raised by the online gaming operators centred around the proposition that games such as rummy, fantasy sports and other skill-based contests do not become betting and gambling merely because participants contribute money for participation. The assessees contended that the long-settled distinction in Indian jurisprudence between games of skill and games of chance continues to apply even where monetary stakes are involved. The Court, however, noted that this issue had already been extensively examined in its judgment in State of Tamil Nadu v. Junglee Games India Pvt. Ltd. and connected matters.
• Referring to the principles laid down in Junglee Games, the Court observed that betting and gambling constitute a distinct economic activity characterised by the staking of money or money’s worth upon uncertain outcomes. The Court emphasised that every game, whether one of skill or chance, ultimately culminates in an uncertain result. Although skill may substantially influence the outcome of a game, it cannot guarantee success. Once money is risked upon an uncertain future event, the activity assumes the characteristics traditionally associated with betting and gambling. The focus therefore shifts from the intrinsic nature of the game to the existence of a staking arrangement linked to uncertainty.
• The Court rejected the contention that betting and gambling are confined only to games of chance. It held that such an interpretation would amount to rewriting the constitutional expression “betting and gambling”. The constitutional text does not employ the phrase “betting on gambling”; rather, it treats betting and gambling as a composite expression referring to wagering activities generally. The Court therefore held that betting on a game of skill remains betting, notwithstanding the fact that the underlying game itself may involve skill.
• Examining earlier authorities such as M.D. Chamarbaugwala and K.R. Lakshmanan, the Court observed that those decisions arose in different statutory contexts and primarily concerned the question whether particular activities could be characterised as games of skill for purposes of penal legislation. Those judgments did not decide the wider constitutional question whether betting on games of skill falls outside the scope of betting and gambling. The Court therefore declined to read those authorities as creating a blanket immunity for wagering activities merely because the underlying game involves skill.
• The Court further observed that an entry fee paid for participation in a genuine skill-based competition stands on a different footing from a stake paid with the expectation of winning a larger amount depending upon an uncertain outcome. In the former case, the fee merely secures the right to participate; in the latter, the payment itself constitutes the wager. The Court concluded that the essential ingredients of betting and gambling are: (i) the existence of a stake or bet; (ii) uncertainty regarding the outcome; and (iii) the expectation of gain or loss depending upon the occurrence of the uncertain event. Once these ingredients are present, the activity acquires the character of betting and gambling irrespective of whether skill plays a role in determining the outcome.

(ii) Constitutional Validity of the Impugned Levy in the Context of Betting and Gambling-

• Having addressed the nature of betting and gambling, the Court proceeded to consider the constitutional challenge to the GST levy. The assessees argued that actionable claims arising from online gaming transactions could not be subjected to GST because such claims were neither goods nor services within the constitutional framework. The Court rejected this contention.
• The Court observed that Article 246A constitutes a special constitutional provision conferring extensive legislative competence upon Parliament and State Legislatures to enact laws relating to GST. The definition of GST contained in Article 366(12A) is broad and encompasses taxation on supplies of goods, services or both. Parliament, while enacting the CGST Act, expressly included actionable claims within the definition of goods and simultaneously preserved taxability of lottery, betting and gambling through Entry 6 of Schedule III.
• The Court held that once Parliament has validly characterised actionable claims arising from betting and gambling as taxable goods, legislative competence cannot be doubted. The challenge based on Articles 14, 19(1)(g), 21 and 265 was rejected on the ground that the levy possesses statutory authority and bears a rational nexus to the legislative objective of taxing supplies arising from organised betting and gambling activities. Mere hardship, commercial inconvenience or increased tax burden cannot render a fiscal statute unconstitutional.
• The Court further observed that taxation of betting and gambling has historically received distinct legislative treatment. The legislature is entitled to treat betting and gambling actionable claims differently from other actionable claims because of their unique economic character and social consequences. The classification embodied in the GST framework was therefore held to be constitutionally valid.

(iii) GST Framework Governing Betting and Gambling Transactions-

• The Court then undertook a detailed examination of the statutory framework governing betting and gambling transactions under GST. It noted that the CGST Act must be read as a cohesive scheme comprising the definitions of goods, supply and consideration together with the charging and valuation provisions.
• The Court observed that Entry 6 of Schedule III excludes actionable claims generally from GST but expressly excludes from that exclusion lottery, betting and gambling. The legislative intent is therefore unmistakable. Parliament consciously chose to tax actionable claims arising from betting and gambling while leaving other actionable claims outside the GST net.
• According to the Court, the statutory framework demonstrates that the taxable event is not the abstract activity of betting and gambling but the supply of actionable claims arising from betting and gambling arrangements. Such actionable claims are treated as goods and their supply attracts GST in accordance with the charging provisions of the Act.
• The Court rejected the argument that the GST framework creates an irrational distinction between betting and gambling actionable claims and other actionable claims. The distinction was regarded as a matter of legislative policy supported by a clear statutory rationale.

(iv) Actionable Claims Arising from Betting and Gambling Transactions and the Nature of Supply-

• The Court next considered whether participation in online gaming transactions gives rise to actionable claims and whether those claims constitute taxable supplies.
• It observed that whenever participants stake money upon uncertain outcomes, they acquire contingent beneficial interests dependent upon the happening of future events. These interests are enforceable in law and therefore satisfy the legal characteristics of actionable claims. The fact that the right remains contingent does not deprive it of legal recognition.
• The Court held that online gaming operators create, administer and regulate the entire ecosystem within which these contingent interests arise. The actionable claim is therefore not an incidental consequence of the transaction but forms the very subject matter of the supply.
• Rejecting the contention that supply requires transfer of a pre-existing actionable claim, the Court held that the statutory concept of supply is sufficiently broad to encompass the creation and provision of actionable-claim interests through organised gaming arrangements. Consequently, online gaming operators qualify as suppliers under the GST framework.

(v) Consideration, Valuation and Measure of Levy-

• The Court then examined the question of consideration and valuation. The assessees argued that only the platform fee retained by the gaming operator should be subjected to GST because the remaining amount is ultimately redistributed among participants.
• The Court rejected this contention. It observed that the actionable-claim interest acquired by participants arises only because stake amounts are deposited and appropriated towards participation in gameplay involving uncertain outcomes. The stake amount therefore constitutes consideration for the supply.
• According to the Court, the attempt to isolate platform fees and disregard the remainder of the transaction artificially fragments a single integrated supply. The participant does not merely purchase access to a digital platform; rather, he acquires the opportunity to participate in a wagering arrangement involving contingent rights and possible winnings.
• The Court further observed that Parliament deliberately refrained from providing deductions in respect of prize pools, winnings or payouts. Since the statute itself does not permit such exclusions, the Court declined to create them judicially. The valuation mechanism was therefore held to be consistent with the legislative scheme.

(vi) Characterisation of Online Gaming Transactions: Supply of Goods or Services

• The Court considered whether online gaming transactions should be characterised as supplies of goods or services. It noted that actionable claims are expressly included within the definition of goods under Section 2(52) of the CGST Act.
• Since the subject matter of the transaction is the actionable claim arising from the betting and gambling arrangement, the Court held that the transaction cannot be analysed solely as a supply of platform services. The actionable claim constitutes the dominant element of the transaction and therefore falls within the category of goods for GST purposes.
• The Court accordingly upheld the statutory treatment adopted by the legislature and rejected the challenge to the notifications and classifications governing such transactions.

(vii) Fantasy Sports

• After dealing with online gaming generally, the Court separately examined the position of fantasy sports operators. The principal contention advanced on behalf of the fantasy sports companies was that fantasy sports are fundamentally skill-based activities and therefore cannot be equated with betting and gambling. It was argued that participants select virtual teams based upon sporting knowledge, statistical analysis, player performance, pitch conditions, weather forecasts and other factors requiring substantial skill and expertise. According to the assessees, success in fantasy sports is primarily dependent upon skill rather than chance and therefore falls outside the GST framework governing betting and gambling actionable claims.
• The Court carefully considered these submissions but found them unpersuasive. Referring to its earlier conclusions on betting and gambling, the Court observed that the decisive consideration is not whether skill is involved in selecting a team or making predictions. The relevant question is whether participants stake money upon uncertain future outcomes and thereby acquire contingent rights dependent upon the happening of those outcomes.
• The Court observed that even where fantasy sports involve considerable skill, the participant ultimately predicts the future performance of players, teams and sporting events. Such predictions remain uncertain and incapable of absolute certainty. The participant therefore risks money upon uncertain future contingencies and acquires the possibility of receiving winnings if those contingencies materialise favourably. According to the Court, the existence of skill in making predictions does not eliminate the uncertainty inherent in the outcome.
• The Court further observed that fantasy sports contests typically involve pooled stakes contributed by participants. The prize pool is generated through such contributions and winnings are distributed according to the outcome of the contest. The participant therefore acquires a contingent beneficial interest in the prize pool dependent upon uncertain future sporting performances. Such an interest possesses all the essential characteristics of an actionable claim.
• A significant factor noticed by the Court was the stand previously adopted by fantasy sports operators under the service tax regime. The Court referred to proceedings under the Finance Act, 1994 in which the Federation of Fantasy Sports had contended that fantasy sports involved actionable claims and therefore stood excluded from the definition of taxable services. The adjudicating authority had accepted that contention and dropped the service tax demand.
• The Court observed that having successfully argued earlier that fantasy sports transactions involve actionable claims, the assessees could not subsequently contend under GST that no actionable claim exists. Such a position was regarded as fundamentally inconsistent. The Court invoked the principle that a party cannot approbate and reprobate or blow hot and cold on the same issue depending upon the tax consequences arising under different statutory regimes.
• The Court also rejected the submission that fantasy sports are distinguishable from other online gaming formats because participants exercise greater control and judgment while selecting teams. According to the Court, the degree of skill involved does not alter the fundamental nature of the transaction once money is staked upon uncertain outcomes. The essential element continues to be the acquisition of a contingent right to receive winnings depending upon future events beyond the participant’s control.
• The Court held that fantasy sports platforms create, administer and regulate the entire contest structure. Participants do not merely receive access to a software platform. They acquire the opportunity to compete for winnings through a structured mechanism established and controlled by the operator. The actionable-claim interest arises through this organised framework and therefore constitutes a taxable supply under the GST legislation.
• While examining valuation, the Court reiterated that the principles applicable to online gaming apply equally to fantasy sports. The stake amount contributed by participants constitutes consideration for the actionable-claim supply. The taxable value is not confined to the platform fee or commission retained by the operator. The participant acquires the actionable-claim interest by committing the entire stake amount towards participation in the contest. Consequently, the entire stake amount forms part of the valuation mechanism prescribed under the GST framework.
• The Court therefore concluded that fantasy sports contests involving pooled stakes and contingent prize structures fall within the statutory framework governing betting and gambling actionable claims. The earlier conclusions recorded in relation to online gaming platforms were held to apply mutatis mutandis to fantasy sports contests. The Court accordingly rejected the challenge mounted by fantasy sports operators and upheld the applicability of GST to such transactions in accordance with the statutory framework.

(viii) Casinos

• The Court thereafter proceeded to examine casino transactions. Unlike online gaming and fantasy sports, the Court noted at the outset that there was no substantial dispute regarding the characterisation of casino activities as betting and gambling. The principal controversy before the Court related not to taxability but to valuation and the methodology adopted for determining the taxable value of casino transactions.
• The casino operators contended that GST should be levied only upon the Gross Gaming Revenue (GGR), namely the amount ultimately retained by the casino after adjustment of winnings paid to players. According to the operators, the balance amount merely passes through the casino and therefore should not form part of the taxable value.
• The Revenue, on the other hand, contended that the taxable value must be determined by reference to the statutory valuation framework governing betting and gambling transactions and not merely by reference to the operator’s retained earnings.
• The Court observed that casino transactions involve participants staking money upon uncertain outcomes with the expectation of receiving winnings depending upon the result of the game. The essential characteristics of betting and gambling are therefore clearly present. The participant acquires a contingent beneficial interest in potential winnings, and such interest constitutes an actionable claim recognised by law.
• The Court further noted that the legislative and regulatory history of indirect taxation consistently treated casinos, lotteries and betting activities as a distinct class of transactions requiring specialised valuation mechanisms. The GST Council and Fitment Committee had repeatedly recognised the practical difficulties that would arise if valuation were linked solely to net revenue retained by operators.
• According to the Court, valuation based exclusively upon Gross Gaming Revenue would fail to capture the true value entering the betting and gambling ecosystem. Participants stake amounts with the objective of acquiring an opportunity to win. The economic reality of the transaction therefore extends beyond the amount ultimately retained by the casino.
• The Court also examined the position prior to the 2023 amendments. It observed that disputes had arisen because the statutory framework did not contain a casino-specific valuation provision comparable to Rule 31C. In such circumstances, the Revenue had resorted to Rule 31 and best-judgment methodologies for determining taxable value. The Court held that such recourse could not automatically be regarded as impermissible merely because a more specific valuation provision was introduced subsequently.
• The Court then referred to Rule 31C introduced through the 2023 amendments. It observed that the Rule provides a specialised valuation mechanism designed specifically for casino transactions. The introduction of Rule 31C reflects legislative recognition of the unique characteristics of casino operations and seeks to eliminate disputes concerning valuation.
• The Court held that casino transactions are fully covered by the GST framework governing betting and gambling actionable claims. The challenge to taxability was therefore rejected. Valuation disputes are required to be resolved in accordance with the statutory framework and the principles laid down by the Court.
• The Court concluded that casinos constitute organised betting and gambling enterprises generating actionable claims in favour of participants. Such actionable claims are taxable under the CGST Act and are subject to valuation in accordance with the applicable statutory provisions. The Court therefore upheld the applicability of GST to casino transactions and rejected the principal challenges advanced by casino operators.
• After examining the constitutional framework, the GST provisions, the nature of actionable claims, valuation provisions, Rule 31A, the 2023 amendments, online gaming, fantasy sports and casino transactions, the Court proceeded to record its final conclusions. The Court observed that the issues raised before it required determination of the true nature of online gaming transactions and the proper interpretation of the GST framework governing betting and gambling actionable claims.
• The Court held that betting and gambling constitute distinct economic activities involving the staking of money or money’s worth upon uncertain outcomes. The decisive factor is not whether the underlying game involves skill or chance but whether participants risk money upon uncertain future contingencies with the prospect of gain or loss. Consequently, once the element of staking upon uncertain outcomes is present, the transaction acquires the character of betting and gambling for purposes of the GST framework.
• The Court further held that actionable claims arising from betting and gambling are expressly preserved within the GST net by the statutory scheme embodied in the CGST Act. While actionable claims generally stand excluded by Entry 6 of Schedule III, Parliament deliberately retained lottery, betting and gambling actionable claims within the taxable category. Such legislative treatment was held to be valid and constitutionally permissible.
• On the issue of legislative competence, the Court concluded that Article 246A confers adequate constitutional authority upon Parliament and the State Legislatures to enact GST legislation governing actionable claims arising from betting and gambling. The inclusion of actionable claims within the definition of goods and their taxation under the CGST Act was held to be within constitutional limits. Challenges founded upon Articles 14, 19(1)(g), 21 and 265 were rejected.
• The Court held that the statutory concept of supply extends beyond transfer of pre-existing actionable claims. Organised betting and gambling ecosystems create actionable-claim interests in favour of participants. Such interests constitute taxable supplies within the meaning of Sections 2(105) and 7 of the CGST Act. Online gaming operators are not mere intermediaries but constitute suppliers of actionable claims generated through the gaming framework created and administered by them.
• The Court further concluded that the consideration for the actionable-claim supply is the amount staked towards participation in gameplay involving uncertain outcomes. The argument that only the platform fee or commission retained by the operator should constitute taxable value was rejected. The Court held that the actionable claim itself arises because participants commit stake amounts towards participation and therefore the valuation framework is validly linked to those amounts.
• With regard to Rule 31A, the Court held that the Rule is intra vires the CGST Act and does not create a fresh levy. It merely operationalises the valuation mechanism contemplated by the parent statute. The Court further held that Rule 31A is not confined to horse-racing transactions and extends generally to betting and gambling actionable claims. The expression “chance to win” was interpreted as describing the actionable claim acquired upon staking money on uncertain outcomes and not as restricting the Rule to games of chance.
• The Court then addressed the 2023 amendments and held that the amendments introducing concepts such as “online money gaming”, “specified actionable claim”, Rule 31B and Rule 31C are clarificatory and explanatory in nature. According to the Court, these amendments do not create a fresh levy but clarify and standardise the existing framework governing taxation and valuation of betting and gambling actionable claims.
• In relation to online gaming, the Court held that participation in online gaming involving pooled stakes and uncertain outcomes gives rise to actionable claims. Participants acquire contingent beneficial interests enforceable in law and such interests constitute taxable supplies under the GST framework. The online gaming companies themselves were held to be suppliers of such actionable claims.
• The Court applied the same reasoning to fantasy sports. It held that fantasy sports contests involving pooled stakes and contingent prize structures fall within the framework governing betting and gambling actionable claims. The existence of skill in selecting teams or predicting performances does not alter the essential nature of the transaction once money is staked upon uncertain outcomes. The Court further noted the earlier stand adopted by fantasy sports operators under the service tax regime and held that they could not deny the existence of actionable claims after having relied upon the same concept previously.
• With respect to casinos, the Court observed that there was no substantial dispute that casino activities constitute betting and gambling. The principal controversy concerned valuation. The Court upheld the applicability of GST to casino transactions and held that valuation disputes must be resolved in accordance with the statutory framework, including Rule 31C introduced through the 2023 amendments.
• Finally, the Court concluded that the GST framework governing betting and gambling actionable claims is constitutionally valid; the charging provisions, valuation provisions and delegated legislation are intra vires; online gaming, fantasy sports and casino transactions involving staking upon uncertain outcomes generate actionable claims; and such actionable claims are taxable in accordance with the CGST Act and the Rules framed thereunder.