The Indian online gaming industry is bracing for a landmark Supreme Court showdown as the 28% GST levy faces intense legal scrutiny. With the final hearings set to commence on March 18, gaming companies are mounting a strong defense against what they call an unjustified tax burden that could cripple the sector. The case, with an estimated financial impact of ₹2.5 lakh crore, is one of the biggest tax battles in India’s history.
Gaming companies are challenging the government’s interpretation of Rule 31A of the CGST Rules, which states that GST at 28% should be levied on the face value of each bet. The industry argues that this rule applies only to gambling and betting, not to games of skill like rummy, poker, or fantasy sports.
This high-stakes battle has drawn some of India’s most prominent legal minds. Representing gaming companies are Harish Salve who represented Vodafone in a significant $2.5 billion tax dispute with the Indian government, ultimately securing a favorable verdict from the Supreme Court, Kulbhushan Jadhav case at the International Court of Justice achieving a stay on the execution of Indian national and Salman Khan Hit-and-Run Case.
Dr. Abhishek Manu Singhvi represented during Bhima Koregaon Case for petitioners and activists and during National Judicial Appointments Commission (NJAC) Case.
Sajan Poovayya was part of the legal team that argued for the recognition of the right to privacy as a fundamental right under the Indian Constitution and involved in the landmark case challenging the constitutional validity of the Aadhaar scheme, focusing on issues related to privacy and data protection.
Rakesh Dwivedi argued on behalf of the Travancore Devaswom Board, defending the traditional practices of the Sabarimala temple. Senior counsels include Dhruv Mehta, Gopal Sankarnarayanan, Balbir Singh, Vikram Nankani, and Arvind Datar, among others.
On the other side, the Union of India will be represented by Additional Solicitor General N. Venkatraman, who will argue in favor of the tax demands and defend the government’s position on retrospective taxation. Some of his notable cases include Kerala v. Union Suit on Borrowing Limits and The Chamber of Tax Consultants vs Director General of Income Tax.
Sources also claim that the matter will be pushed to April considering other important tax related matters being in focus of the government.
Adarsh Somani, Partner, Economic Laws Practice said, “It is important to note that should the Supreme Court uphold the tax demands or merit of the notices so issued, many businesses may be forced to cease operations, as the tax liabilities would far exceed their revenues—let alone their profits.”
Somani further said, “Also, in a potential turn of events, the government has introduced Section 11A, aimed at regularizing industry practices. It will be interesting to see whether, even if victorious, the government would resort to this provision only to safeguard the industry & its future.”
It should be noted that 28% GST has drastically affected the real money gaming industry but if the Court rules in favor of the gaming industry, it would set a major legal precedent, reinforcing the distinction between games of skill and gambling. The decision will also impact future regulatory policies, investor sentiment, and the long-term sustainability of India’s booming real-money gaming (RMG) sector.
Another top counsel on condition of anonymity said, “The industry has a very strong case on merits as plethora of High Court judgments support the case and there is seven-decade of jurisprudence making it clear that games of skill are distinct from gambling and betting. The government is claiming that Rule 31A of CGST Rules (taxation of gambling/betting @28% on face value of bets) is applicable for the period July 2017-October 2023, online skill-gaming when played for stakes falls within the ambit of betting and gambling and that the platforms are supplying actionable claims amounting to gambling and betting.”
As the battle unfolds, all eyes are on the Supreme Court’s final verdict, which could determine the fate of India’s online gaming sector.