Online gaming to face 28% GST blow? SC to continue hearing on whether online Rummy, skill games qualify as gambling

The Supreme Court is set to continue hearing a pivotal case that could reshape the legal and tax framework for India’s online gaming sector on Tuesday, May 6, 2025. A bench comprising Justices JB Pardiwala and R Mahadevan is examining whether real-money games, even if skill-based, should be classified as gambling under the Goods and Services Tax (GST) law.

The case involves show-cause notices worth Rs 1.12 lakh crore issued by the Directorate General of GST Intelligence (DGGI) to online gaming platforms and casinos over alleged tax evasion. The court had stayed these notices in January and posted the matter for final hearing in May.

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Representing Centre, Additional Solicitor General N Venkataraman argued that the government is taxing the “speculative outcome” of games—not the games themselves—which amounts to gambling. “Whether Rummy is a game of skill or chance has no relevance. These online activities are betting and gambling,” he told the court.

The ASG maintained that placing monetary stakes on any game—regardless of its skill component—transforms it into gambling. Citing the Supreme Court’s Constitution Bench ruling in the Satyanarayana case, he said any game played for stakes with an uncertain outcome qualifies as betting and gambling.

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18% GST instead of 28%

He also pointed out that gaming platforms have been paying 18 per cent GST by treating their services as regular supply, whereas their activities should attract 28 per cent GST under the Central GST Act.

On Monday, the courtroom witnessed heated exchanges as senior advocate AM Singhvi, representing a gaming platform, countered the Centre’s stance. He argued that betting does not alter the fundamental nature of a skill-based game. 

‘Does wagering on chess make it gambling?

“Is the government saying that the moment money is wagered on chess, it becomes gambling? The character of the game cannot be changed like that,” he said, referencing repeated judicial affirmations that skill-based games are distinct from games of chance.

The case stems from the Karnataka High Court’s 2023 decision that quashed a Rs 21,000 crore GST notice against Gameskraft, ruling that online Rummy did not amount to gambling. The top court later clubbed 27 writ petitions from various High Courts with the Gameskraft case for a consolidated hearing.

At the heart of the matter is whether GST should apply to the full contest entry amount—including prize money—or only to the platform’s service fee. The government is pushing for a 28 per cent levy on the entire amount, while companies argue that tax should be limited to their commission.