Actionable Claims under GST: Understanding Taxability through the Gameskraft Judgment by Hon’ble Supreme Court
By K. Raji Reddy, IRS, Asst. Commissioner (AR), CESTAT, Hyderabad.
The recent judgment of the Hon’ble Supreme Court in the case of Directorate General of GST Intelligence vs Gameskraft Technologies Private Limited and others has emerged as one of the most important pronouncements in GST jurisprudence. The Court examined the constitutional validity of the GST framework governing betting, gambling, casinos and online money gaming and upheld the legislative scheme enacted by the Parliament. The Court rejected challenges based on various provisions of the Constitution and reaffirmed the power of Parliament to subject specified actionable claims to GST. Since the judgment has generated considerable interest among tax administrators, professionals and industry participants, this article attempts to understand the concept of actionable claims under the CGST Act, 2017 by taking the judgment as a trigger for discussion. For ease of understanding, real-time examples are used wherever possible.
2. The Hon’ble Supreme Court held that betting, gambling, casinos and online money gaming were liable to GST from the very inception of the GST regime. It further held that the amendments introduced through the Goods and Services Taxes (Amendment) Act, 2023 are clarificatory in nature and merely explain the existing legal position. In other words, the amendments did not create a fresh levy but clarified what Parliament had always intended. The Court therefore upheld the validity of the legislative framework and rejected the constitutional challenges mounted against it.
3. The judgment also examined the valuation mechanism prescribed under the GST law including Rue 31A of CGST Rues,2017. New Rules 31B and 31C of the CGST Rules,2017 which prescribe special methods for valuation of online money gaming, casinos, horse racing covered in the definition of ‘specified actionable claims’ under Section 2 (102A) of the CGST Act,2017 were examined and upheld as valid. The specified claims was defined and entry 6 of Schedule-III was amended through the Goods and Services Taxes (Amendment) Act,2023. Rule 31A is on valuation of lottery, betting and gambling existing in the Rules from the beginning. Significantly, the Court observed that these new rules inserted in 2023 w.e.f 1.10.2023 could be applied even while determining tax liabilities pertaining to earlier periods because the taxability of such specified actionable claims existed from the beginning itself. The adjudicating authorities were directed to determine tax liability by taking into account the valuation principles contained in these rules.
4. The concept of actionable claim is not defined independently under GST law. Section 2(1) of the CGST Act, 2017 on ‘actionable claim’ adopts the meaning assigned under Section 3 of the Transfer of Property Act, 1882. Broadly stated, an actionable claim means a claim to any unsecured debt or a beneficial interest in movable property not in the possession of the claimant, which civil courts recognize as affording grounds for relief. Put simply, an actionable claim is a legally enforceable right to receive money or a beneficial interest in movable property in future.
5. A real-time example may assist in understanding the concept. Suppose a dealer sells a mobile phone worth ₹20,000 on credit and allows the purchaser sixty days to make payment. Until the payment is received, the dealer possesses a legally enforceable right to recover the amount. The dealer does not presently possess the money but has a legal claim against the purchaser. This recoverable debt constitutes an actionable claim. Likewise, unpaid rent recoverable by a landlord or an insurance claim receivable by a policyholder are examples of actionable claims.
6. A distinction must be maintained between money and an actionable claim. Currency notes, bank balances, deposits, withdrawals and remittances are transactions in money. An actionable claim, on the other hand, is merely a right to receive money in future. For example, an insurance policyholder’s right to receive compensation after an insured event is not money itself but a right to recover money. This distinction assumes significance because GST generally excludes money from its scope while adopting a special treatment for actionable claims.
7. The CGST Act, 2017 departs from traditional legal concepts by specifically including actionable claims within the definition of goods. Section 2(52) defines goods to mean every kind of movable property other than money and securities but specifically includes actionable claims. Traditionally, actionable claims were not regarded as goods because they are intangible rights. Parliament, however, consciously created a statutory fiction by including actionable claims within the definition of goods and the Hon’ble Supreme Court upheld this legislative choice.
8. The inclusion of actionable claims within the definition of goods does not automatically make all actionable claims, taxable. Entry 6 of Schedule III to the CGST Act, 2017 provides that actionable claims except a few, shall be treated neither as a supply of goods nor as a supply of services. Consequently, ordinary actionable claims such as book debts, insurance claims, unpaid rent and similar rights remain outside the GST net. Parliament therefore included actionable claims in the definition of goods but simultaneously excluded most of them from taxation through the said Schedule III.
9. Lottery, betting, gambling, horse racing, casinos and online money gaming were excluded from the protection of Schedule III and therefore remain taxable. The legislative design is unique. Actionable claims are first included in the definition of goods, then generally excluded from GST through Schedule III, and finally selected categories are brought back into the tax net through specific exceptions. The Supreme Court held that this scheme is deliberate, intelligible and constitutionally valid.
10. Let us take the example of a lottery ticket that illustrates the concept effectively. A lottery ticket is not merely a printed piece of paper. It embodies a contingent right to participate in a draw and claim prize money if successful. That right constitutes an actionable claim. When a participant purchases a lottery ticket for ₹100, GST is attracted on the supply of the actionable claim represented by the ticket. If the participant subsequently wins ₹10 lakh, the prize money merely represents realization of the actionable claim that was already taxed at the time of supply.
11. Betting and gambling operate on the same principle and of course, betting and gambling are illegal in many States in the country. Consider a horse racing in a race club. A person stakes ₹10,000 on a horse winning the race. By placing the stake, the participant acquires a contingent right to receive money if the prediction proves correct. This contingent right constitutes an actionable claim. The taxable event under GST is not the sporting event itself or the prediction but the supply of the specified actionable claim recognized by the statute. Similarly, when a player purchases casino chips worth ₹50,000 and participates in games involving uncertain outcomes, the rights arising from such participation fall within the category of specified actionable claims taxable under the GST framework.
12. An important feature of the present legal regime is the valuation mechanism. The lawmakers consciously chose not to extend the conventional cum-tax benefit normally associated with transaction-value based taxation as provided under Section 15 of the CGST Act,2017 read with Rule 35 of CGST Rules,2017 . Rule 31A governs valuation method in respect gf lottery, betting, gambling and horse racing. By introducing Rules 31B and 31C of the CGST Rules, 2017,a special valuation mechanism was prescribed based upon the face value of the full amount of bets placed, the amount paid for participation in online gaming, in online money gaming and casinos. The legislative intent was that the face value of the transaction itself should constitute the taxable base. The Supreme Court upheld this special valuation method and recognized that the rules merely operationalize the taxation of specified actionable claims.
13. It may be noted that for classification purposes, Notification No. 72/2023-Customs (N.T.) dated 20th October 2023 introduced Customs tariff classification for specified actionable claims under Heading 9806 of the first Schedule to Customs Tariff Act,1975 and the said Tariff is applicable for classification of goods under GST law . Accordingly, lottery, betting, gambling, casinos and online money gaming are classified as actionable claims for tariff and GST classification purposes. This classification provides statutory support to the special treatment accorded to such transactions as goods under the GST framework. GST rate at 28% was prescribed through the amending Notification 11/2023-CTR dt 29.9.2023 to the goods Notification 11/2017-CTR effective form 1.10.2023. The rate is increased to 40% as per Schedule-III of the Notification 9/2025-CTR dt 17.9.2025, w.e.f 22.9.2025.
14. A distinction must also be drawn between actionable claims falling under heading 9806 and services connected with actionable claims, if the service provider is different from the organiser of actionable claims. Lottery-related services are generally classified under SAC 999694, while gambling and betting services are classified under SAC 999692. For example, the lottery ticket itself represents a taxable actionable claim. However, the commission earned by a distributor for marketing the ticket is a taxable service. Likewise, the underlying bet placed by a participant may constitute a taxable actionable claim, whereas the facilitation fee charged by a platform operator for providing technological infrastructure constitutes a taxable service. Thus, GST law recognizes two separate supplies within the same ecosystem—the actionable claim itself and the service connected with that actionable claim prior to 2023 Amendment Act. However, the above SACs were omitted with effect from 20.10.2023 through the Notification N.12/2023-CTR dt 19.10.2023
16. In this regard, it is important to note that the definition of supplier under Section 2(105) of the CGST Act, 2017 was amended through the said 2023 Amendment Act. A proviso was inserted to the definition of supplier to state inter-alia that the person who organises or arranges, directly or indirectly, supply of specified actionable claims is deemed to be a supplier of such actionable claims with a responsibility to discharge tax liability under GST law.
17. The Hon’ble Supreme Court upheld the constitutional validity of the GST framework, stating that betting, gambling, casinos and online money gaming were taxable right from the inception of GST. The Court also recognized the clarificatory nature of the GST (Amendment) Act, 2023, upheld Rules 31B and 31C relating to valuation, and affirmed the legislative policy of adopting face value as the taxable base for specified actionable claims. The judgment is likely to remain the leading authority on the subject and offers valuable guidance for understanding one of the most intricate areas of GST law. Top of Form
(Views expressed are personal views of the author)
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