In a major setback for the online gaming industry, the Supreme Court on Wednesday upheld the retrospective imposition of 28 per cent GST on online gaming platforms, while ruling that companies offering real-money games are not merely intermediaries but suppliers of actionable claims liable to taxation. However, the court said the ultimate determination of tax liability in individual cases would rest with the concerned GST authorities.
The apex court also upheld State laws enacted by Tamil Nadu and Karnataka criminalising online games played for stakes, including rummy, poker and fantasy sports.
The ruling could reshape the sector’s regulatory landscape even though its practical impact may be limited for some firms. | Photo Credit: SUSHIL KUMAR VERMA
A Bench of Justices JB Pardiwala and R Mahadevan set aside an earlier Karnataka High Court ruling that had favoured gaming firms. The Bench held that GST on actionable claims linked to betting and gambling was constitutionally valid and observed that online gaming operators could not escape tax liability by portraying themselves as mere technology platforms facilitating contests.
Case history
The dispute stemmed from a series of GST notices issued to real-money gaming companies after authorities argued that tax should be levied on the entire face value of bets or contest entry amounts, rather than only on the platform commission or gross gaming revenue retained by operators. Gaming firms had maintained that GST should apply only to the revenue earned by the platform after payouts to winners.
The issue escalated after the GST Council’s 2023 decision to impose 28 per cent GST on the full value of online gaming, casinos and horse racing. Following that move, tax authorities issued notices running into roughly ₹1.12 lakh crore, with the industry’s total potential liability, including penalties and interest, estimated at nearly ₹2.5 lakh crore.
Regulatory shift
Legal experts said the ruling could reshape the sector’s regulatory landscape even though its practical impact may be limited for some firms.
Sudipta Bhattacharjee, Partner at Khaitan & Co, said several companies had already either shut operations or altered business models following tighter regulatory scrutiny on online money gaming. He suggested that the Centre could consider invoking Section 11A of the CGST Act to regularise the tax position adopted by the industry before September 2023, when lower GST payments were widely prevalent.
The Bench observed that betting and gambling fall within the category of “res extra commercium”, or activities outside the protection of ordinary trade and commerce, and therefore cannot be claimed as a fundamental right.
Vidushpat Singhania, Managing Partner at Krida Legal, described the judgment as a significant setback to the online gaming industry, saying it unsettles the long-standing legal distinction relied upon by skill-gaming businesses. According to him, the ruling strengthens the authority of States to regulate or prohibit online games played for stakes, creating fresh uncertainty for companies operating in India’s digital gaming ecosystem.
Published on May 27, 2026