The Supreme Court on July 22 continued hearing a set of petitions concerning whether online gaming platforms and casinos can be classified as gambling and thus be subjected to 28% Goods and Services Tax (GST). A critical issue before the Court is whether GST can be levied on the entire face value of bets placed on gaming platforms and casinos.
The matter is being heard by a bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan, examining the challenge to a 2023 Karnataka High Court judgment that had favoured online gaming company Gameskraft. That order had ruled that GST applicable to gambling and betting cannot be imposed on Gameskraft, treating it differently from gambling platforms. The GST department challenged this decision before the apex court.
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As a result, the Supreme Court transferred all related cases pending across India to itself and also stayed all show-cause notices, even those that were time-barred, through an order dated January 10.
One counsel representing two casinos from Sikkim and Goa argued that:
“The value of bets put on casino games can never represent the value of the ‘right to win’ as defined under Section 15(1) of the GST Act. The casino doesn’t receive or accrue the bet amount, hence it cannot be considered consideration for goods or services.”
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He stressed that GST must be levied on the supply of services, not on the bet amount, as:
“We are not taxing the bet. We are taxing the supply of the right to win.”
The lawyer clarified the difference between two types of games offered by casinos:
- Player vs Player Games (e.g., Poker, Teen Patti):
Here, the casino only facilitates the game. Players bet among themselves, and the casino merely takes a small cut from the collective pot, regardless of who wins. “The casino neither accrues nor receives the bet amount. It just earns a percentage from the pot.” - Player vs House Games (e.g., Roulette):
In this case, the win/loss is settled on the table. If the bet wins, the casino pays; if not, the casino retains the money. “Even here, the casino doesn’t always receive the entire bet. It’s the risk-based probability that governs payout.”
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Explaining the Roulette game, the lawyer submitted that the player bets based on probability:
“If I bet on a single number (1 in 36 chance), I may win 35 times my money. If I bet on a colour like black or red, with 50% probability, I may double my money.”
Justice Pardiwala posed a question:
“Can there be a case where all players lose their bets?”
The counsel replied:
“Yes, in such a case, the casino gets the amount, and it becomes part of its revenue.”
In earlier hearings, the Court had asked if the sale of chips to players could be considered a taxable transaction. Addressing this, the counsel argued:
“Sale of chips does not grant any right to win. It is just an exchange of money. Without commission or additional service, it does not attract GST.”
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The hearing in the matter will continue tomorrow, as the Court delves deeper into the legal nuances of how gaming and betting are valued under GST law.
Case Details:
Directorate General of Goods and Services Tax Intelligence HQs vs Gameskraft Technologies Private Limited
SLP(C) No. 19366-19369/2023