New Delhi: In a major setback for online gaming firms, the Supreme Court of India on Wednesday upheld the constitutional validity of the 28% goods and services tax (GST) levy on online gaming and rejected challenges against retrospective tax demands worth nearly ₹1.5 trillion. The landmark ruling is seen having far-reaching implications for the sector.
The verdict, delivered by a bench of Justice J.B. Pardiwala and Justice R. Mahadevan, dismissed a batch of petitions filed by online gaming companies, casinos, turf clubs and industry bodies challenging GST notices and the legal framework governing taxation of online gaming.
The court upheld the validity of the retrospective tax demands raised by authorities and ruled in favour of the Centre’s interpretation of the GST framework.
The verdict comes amid wider regulatory changes after Parliament enacted the Promotion and Regulation of Online Gaming Act in August 2025, prohibiting online money games involving monetary stakes. The court’s order on ‘games of skill’ and ‘games of chance’ may also impact pending constitutional challenges to online gaming regulations.
Last August, the Centre all real-money games, such as those marketed by Dream11, Gameskraft and Games24x7, citing money laundering and social harms. The law was brought into force on ground earlier this year, and led to most ventures shutting down, or pivoting to new areas that haven’t generated any significant revenue as yet.
The apex court verdict complicates matters even further. A senior lawyer, who represented a top online gaming industry body, said that “the verdict is likely to lead multiple companies to insolvency, and cause many top venture capital firms to write off significant investments.”
“At the same time, there’s nothing done so far to ban and block offshore gambling operators, which makes this very targeted takedown of a once-thriving homegrown industry quite a shocking precedent to set,” the lawyer said. The lawyer requested anonymity as the body was still in process of framing its response.
The petitioners in the case were companies including Games24x7, Head Digital Works, Play Games24x7 Pvt. Ltd, Baazi Networks Pvt. Ltd and the E-Gaming Federation, among others. The companies had challenged the tax demands issued by the Directorate General of GST Intelligence (DGGI), arguing that the should apply only prospectively, from 1 October 2023, after the amendments approved by the GST Council came into effect.
A spokesperson for Dream11, India’s largest online gaming firm until it was operational, declined to comment on the verdict. Mint‘s queries to Games24x7 and Gameskraft were not immediately answered.
In the case, the government had argued that the amendments had merely clarified the existing legal position and did not introduce a fresh levy, which made the earlier tax demands valid. The Supreme Court accepted this position.
The top court held that online gaming, and similar real-money games involving pooled stakes and prize structures create “actionable claims” arising from betting and gambling and are, therefore, taxable under the GST framework. It held that online gaming operators are not merely intermediaries facilitating transactions between users, but they themselves constitute suppliers of actionable claims.
Rejecting one of the industry’s central arguments, the bench ruled that GST cannot be restricted only to platform fees or gross gaming revenue. Instead, amounts staked by users constitute consideration and prize pools and winnings and payouts cannot be excluded while determining taxable value.
Accordingly, the court held that online gaming activities, including fantasy sports and other digital games involving pooled stakes, amount to betting and gambling for GST purposes.
The Background
The dispute traces back to one of the biggest tax actions against India’s online gaming sector. The DGGI had issued notices worth nearly ₹1.5 trillion, alleging gaming firms had underpaid GST by paying tax only on commissions and platform fees, instead of the entire face value of deposits, bets or entry amounts placed by users.
Gaming companies argued that they had merely facilitated skill-based games and retained only a platform fee, while prize pools belonged to users. They maintained GST should apply only to gross gaming revenue, rather than the total deposits.
The dispute intensified after the GST Council in August 2023 amended the law to impose a uniform 28% GST on the “full face value” of bets, deposits and entry amounts in online gaming, casinos and horse racing with effect from 1 October 2023.
The industry maintained that the changes had created a fresh tax regime and, therefore, could not be retrospectively applied.
The litigation reached the Supreme Court after multiple gaming companies approached various high courts challenging their GST notices. A key turning point came in the Karnataka High Court’s 11 May 2023 ruling in the Gameskraft matter, where the court quashed a ₹21,000 crore GST notice and held that games of skill could not be equated with betting and gambling.
Following multiple challenges across high courts, the Centre sought transfer of these matters to the Supreme Court, leading to consolidation of over 100 cases involving over 90 companies, casinos and turf clubs.
The bench heard arguments over nearly five months before reserving its judgment in August 2025.
The latest Supreme Court ruling is expected to significantly hit the industry, which had warned that the tax demands exceeded the cumulative revenues earned by several gaming companies and any recovery proceedings could threaten the viability of many firms.