India’s Tax Authority labels fantasy games as gambling before Supreme Court

The Centre has told the Supreme Court that online gaming involving stakes constitutes gambling and is therefore taxable at 28% under the Goods and Services Tax (GST) regime. Appearing before a bench led by Justice JB Pardiwala, Additional Solicitor General N. Venkataraman argued that it is the speculative outcomes of such games—not whether they involve skill or chance—that are subject to taxation. He stated that the distinction between games of skill and chance is irrelevant when players wager money on uncertain outcomes.

The government stressed that online gaming companies have been wrongly classifying their services under an 18% GST bracket, while in reality their activities fall within the scope of betting and gambling. Citing a constitutional bench judgment in the Satyanarayana case, the ASG said staking money on unknown outcomes is the legal definition of gambling, regardless of the nature of the game. The Supreme Court is currently hearing a batch of petitions challenging tax demands totaling Rs 1.12 lakh crore issued by the Directorate General of GST Intelligence (DGGI) to online gaming companies and casinos.

According to the Centre, Rs 91,684 crore of the disputed amount pertains solely to online gaming platforms. The government amended the GST law in August 2023, requiring overseas gaming firms to register in India starting October 1, 2023, and clarified that all games involving stakes—regardless of skill—would attract 28% GST on full bet value. Companies including Delta Corp, Head Digital Works, and Play Games24x7 have challenged the move, arguing that GST should be levied only on gross gaming revenue, not the entire bet amount.

The Supreme Court will issue a final verdict with significant implications for the industry’s regulatory framework.