Shares of gaming companies came under heavy selling pressure on Friday, May 29, after the Supreme Court upheld the government’s retrospective imposition of 28% Goods and Services Tax (GST) on online gaming platforms. The verdict is expected to have significant financial implications for the sector, which has been locked in a prolonged legal battle over the tax treatment of online gaming activities.
emerged as the biggest loser among listed gaming companies, plunging as much as 16% to an intraday low of ₹68 on the BSE. also traded lower, falling 3.5% to an intraday low of ₹279.35.
The Supreme Court ruled that online gaming platforms cannot be treated merely as intermediaries and held that such activities create actionable claims under law. The apex court further observed that the legislative amendments validating the tax levy were clarificatory in nature and therefore applicable retrospectively.
The ruling comes as a major setback for online gaming companies, which had challenged the retrospective application of the 28% GST levy, arguing that the government’s interpretation of “gambling” under GST law was inconsistent with more than six decades of judicial precedents laid down by the Supreme Court and various High Courts.
Legal dispute details
The legal dispute dates back to September 2023, when the Supreme Court stayed a Karnataka High Court order that had quashed a Directorate General of GST Intelligence (DGGI) notice seeking nearly ₹21,000 crore in GST from Gameskraft. The tax notice alleged that the company promoted online betting through platforms such as Rummy Culture, Gamezy and Rummy Time.
Gameskraft contended that online gaming operators do not supply actionable claims to players and therefore the GST levy was unsustainable. The company also argued that gaming platforms merely function as intermediaries facilitating contests, without having any claim, lien or interest in prize money and without engaging in side-betting activities.
Senior advocate Harish Salve, representing fantasy gaming companies, had also argued that the industry was not opposed to a prospective 28% GST levy on the full face value of bets rather than gross gaming revenue. However, the industry strongly objected to the retrospective application of the tax.
The DGGI, on the other hand, maintained that online gaming companies were effectively engaged in betting and gambling activities, making player stakes taxable at the highest GST slab applicable to speculative transactions.
According to submissions made before the court, the cumulative tax demand raised through show-cause notices amounted to approximately ₹91,684.81 crore for online gaming companies alone. When casinos are included, the total tax demand rises to around ₹1,08,505 crore.
The Centre had also amended GST laws in August 2023, making it mandatory for overseas online gaming companies to register in India from October 1, 2023. Gaming firms had sought clarity on the retrospective applicability of the 28% GST levy on the full value of bets placed by players rather than on gross gaming revenue.
Several companies and industry bodies, including Delta Corp, Head Digital Works, Play Games24x7 and the E-Gaming Federation, had challenged the government’s decision to retrospectively impose GST on the entire face value of bets.
The show-cause notices issued by tax authorities sought GST on the “buy-in” amount paid by participants for each game, as well as on prize pool proceeds. Authorities argued that staking money in online games, irrespective of whether they involved skill or chance, amounted to betting and gambling under GST law.
The petitioners, however, maintained that the “buy-in” amount could not be classified as an actionable claim subject to GST.
Industry faces massive tax liability after landmark verdict
Tax experts believe the judgment could fundamentally alter the economics of India’s real-money gaming industry.
Karthik Mani, Partner and Leader – Indirect Tax (South), Tax & Regulatory Advisory at BDO India, said, “In a landmark verdict that reshapes India’s digital gaming landscape, the Supreme Court today upheld the constitutional validity of GST on online gaming, ruling that skill-based games, including fantasy sports and rummy, attract 28% GST under the betting and gambling framework once real money is staked on uncertain outcomes.”
He added, “A bench of Justice JB Pardiwala and Justice R Mahadevan held that the skill element of a game becomes irrelevant for tax purposes the moment a player wagers money on an uncertain result, effectively closing a long-contested legal argument by the industry. The ruling, which consolidates demands against 27 major gaming companies including Gameskraft, Dream11, and MPL, puts the sector’s cumulative GST liability at over ₹1.3 lakh crore, a figure that could fundamentally alter the economics of real-money gaming in India.”
The verdict is expected to have far-reaching consequences for the online gaming ecosystem, as companies now face the prospect of substantial tax outflows and increased regulatory scrutiny. Investors will also closely monitor how affected firms respond to the ruling and whether the industry seeks alternative legal or policy remedies to address the impact of the retrospective GST levy.
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