The Supreme Court on May 13 heard extensive arguments on the applicability of the 28% GST on online gaming. Senior advocates Harish Salve and Dr. Abhishek Manu Singhvi appeared for online gaming companies, contesting the legality of Rule 31A of the CGST Rules.

Today’s hearing was a part of the ongoing Gameskraft batch of cases. A division bench comprising Justices JB Pardiwala and R. Mahadevan is hearing the matter. The court will continue proceedings on May 14.

Dr. Singhvi opened the session by referencing key High Court rulings. He argued these judgments correctly interpreted Supreme Court precedents on games of skill. He cited the Chamarbaugwala, Satyanaryana, and Lakshmanan cases. He urged the bench not to disturb the settled legal position on skill-based games.

He also noted that a few High Courts have misinterpreted these rulings. According to him, those courts failed to consider relevant portions of the binding precedents.

Following Singhvi, Harish Salve began submissions on behalf of the E-Gaming Federation and other companies. He argued that online platforms facilitate gameplay but do not fall under  supply of goods or supply of services. Therefore, they cannot be taxed under GST.

Salve stated, “There is no ‘actionable claim’ that arises from participating in a game of skill.”

He questioned whether entry fees for games like fantasy sports and rummy constitute actionable claims. He argued these fees cannot be treated as ‘goods’ and taxed under the GST framework.

Salve criticised Rule 31A of the CGST Rules, calling it a “colourable exercise of legislative power.” He claimed the rule unfairly equates skill-based gaming with betting and gambling.

“Rule 31A is plainly a colourable exercise of legislative power,” he submitted.

He pointed out that operators usually retain only 10% of the entry fee as a service charge. The current tax interpretation demands 28% GST on the entire pool, far exceeding operator earnings.

Salve stated operators neither control the prize pool nor participate in the games. He stated, “The essential feature of these games is that a Player who participates in the game plays against other Players.” 

He also argued that taxing these games as gambling contradicts the constitutional framework. He said such taxes must fall under Entry 97 of List I and not under GST powers.

Salve further highlighted that players’ deposits are kept in escrow accounts. Winnings go directly to individual player wallets, not to operators.

The petitioners contend that the GST Council’s approach violates the 101st Constitutional Amendment. It removed state powers to tax gambling and betting under Entry 62 of the State List.

The case is expected to influence tax policies in India’s online gaming industry. With a financial impact of nearly ₹2.5 lakh crore, the verdict holds significant weight.

The hearing resumes on May 14 as Salve continues his arguments.

Source: G2G News