SC Upholds Levy of 28% GST on Online Gaming

Supreme court has in its judgment on 27 May, 2026 in bunch of writ petitions / appeals in relation to levy of GST on online gaming activities, has upheld the levy of GST @ 28% retrospectively on the full face value of bets placed true in real money gaming (RMG) platforms. [Directorate General of GST Intelligence (Hqs) & Ors. v. Gameskraft Technologies Pvt. Ltd. and Ors. (2026) 5 TMI 1822; (2026) 186 taxmann.com 1232 (SC) -CIVIL APPEAL NO(S). 8241 – 8244 OF 2026 – Case/Writ Numbers: SLP (C) No. 19366-19369 of 2023]  In yet another case, it has held that State Governments have a right to enact laws to prohibit online money gaming in their state jurisdictions. Centre has already enacted the new regulation i.e., Promotion and Regulation of Online Gaming Rules, 2026 w.e.f. 01.05.2026.

According to one estimate, there is an outstanding demand of around Rs. 92,000 crores for online gaming and about Rs. 17,000 crores for casinos, besides levy of interest and penalties. The major players in this sector include, inter alia, Dream Sports, Gameskraft, Delta Corp, Games 24×7 etc.

Apex court has over ruled the Karnataka High Court judgment which was in favour of gaming companies where in it was held that ‘rummy’ was a game of skill and as such firms offering such game was not a supplier of actionable claim so as to be subjected to levy of GST. [Gameskraft Technologies Pvt. Ltd v. Directorate General of GST Intelligence (Hqs) and Others (2023) 98 GST 93; (2023) 5 TMI 926; (2023) 150 taxmann.com 252 (Karnataka)]

 The Apex Court judgment inter alia, deals with issues of betting and gambling; constitutional validity of levy on such betting & gambling; GST framework governing such transactions; validity of Rule 31A; GST Council’s recommendation; scope of ‘chance to win’; retrospective application of amendment, valuation of supply in online gaming, fantasy sports and casinos etc.

The Apex Court held has follows as per detailed judgment:

• The Court upheld the constitutional validity of levying a 28% Goods and Services Tax (GST) on the full value of the bets and ruled that the tax applies retrospectively.
• There is no constitutional infirmity in levying GST on online games and as such is declared valid.
• Levy of GST is constitutionally valid and did not violate the constitutional framework governing GST. It does not transgress Articles 366 (12) and 266 (12A) of the constitution.
• The concept of ‘supply’ under Section 7 of the CGST Act is not confined to transfer of pre-existing actionable claims. It extends to the creation of actionable-claim interests within organised betting and gambling arrangements. The absence of a pre-existing claim being transferred does not remove such transactions from the tax net.
• Betting and gambling fall within the category of ‘res-extra commercium’, or activities outside the protection of ordinary trade and commerce, and, therefore, can not be claimed as a fundamental right.
• Organised gaming platforms create a commercial ecosystem – within which participants acquire contingent beneficial interests in movable property upon participation — i.e., a ‘chance to win’ upon staking. These constitute actionable claims within the meaning of Section 3 of the Transfer of Property Act, 1882.
• For the purpose of the GST legislative framework, the determinative element is the existence of monetary stakes on an uncertain future outcome.
• Online gaming platforms involving pooled stakes and uncertain outcomes fall within the ambit of “betting and gambling” for tax purposes.
• Supply of actionable claims under GST includes organised betting and gambling structures in which such claims arise, even without transfer of a pre-existing claim.
• There is no statutory mandate to carve out prize pools and GST must be levied on the total deposit or face value of the stakes, rather than just the platform fee commission.
• Online gaming, including fantasy sports, when played for stakes, is betting and gambling under the GST framework.
• The full stake amount appropriated towards participation constitutes consideration and enters the valuation mechanism under Section 15 of CGST Act, 2017.
• 28% levy of GST on full face value of bets is valid.
• Court has ruled that tax shall be payable @ 28% on full value with retrospective effect along with interest and penalties.
• Companies are not mere neutral intermediaries. By managing the entry pool, controlling the wallet withdrawals, and defining rules of win-distribution, the digital platforms explicitly create a conditional beneficial interest in movable property (the prize pool) and it constitute a taxable “supply of goods” under Section 7 of the CGST Act, 2017.
• Gaming entities are not merely facilitators or intermediaries but engaged in supply of services as suppliers of actionable claims and therefore, liable to charge and payment of GST.
• Skill based games also acquire character of betting for purpose of GST as money is at stake on uncertain outcomes.
• Ruling also validates GST rules for determination of taxable supplies in case of betting, lotteries, gambling, horse race and casinos.
• Amendments in law w.e.f. 01.10.2023 validating levy of GST are clarificatory in nature and would operate retrospectively.
• Online gaming activities including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of GST frame work.
• Online gaming and fantasy sports operators were held to be suppliers of actionable claims, and valuation is to be governed by Rule 31B.
• The challenge to taxability and to the use of best judgment methods failed, but casino valuation and computation were directed to be re-determined in accordance with Rule 31C.
• In October 2023, GST Council had recommended GST @ 28% on full value of online gaming bets.
• SC also commented that:
  • Addiction to online betting was creating disturbance on social tranquility.
  • Government can decide on banning such activities to protect public health.
  • Online gaming companies cannot claim violation of fundamental rights to practice trade.
  • Betting and gambling does not need any protection and states are competent to frame laws to curb the mischief of betting and gambling.
  • Online gaming has adverse effect on society and its addition causes depression among people.

 Effect on online gaming players

• Review further legal recourse by way of review or otherwise including lobbying for law change, removal of retrospective applicability or change in manner of taxation.
• Legal / economic restructuring of online gaming / digital entertainment industry in offing.
• Likely fixation of tax liability on adjudication of pending show cause notices and long drawn litigation.
• Concerned corporates may fear the risk of closure or insolvency / shutdown
• Concerned corporates will have to reassess their business models and even look for new businesses for survival or continuity.
• Facing cash crunch / liquidity issues on demand may far exceed cash reserves and operating profits.
• There may be no further growth of real online going industry