On May 5–9, 2025, a two-judge bench of the Supreme Court (Justices J.B. Pardiwala and R. Mahadevan) heard a high-stakes dispute over the Centre’s decision to impose a uniform 28 percent GST on the entire stake in real-money online games—whether they involve skill (like rummy, chess or fantasy sports) or chance.
The government, led by Additional Solicitor General N. Venkataraman, argued that once money is wagered, any contest becomes “gambling” under the CGST Act, rendering the traditional skill–chance distinction irrelevant for tax purposes. Online gaming firms—represented by senior counsels A.M. Singhvi and Harish Salve—countered that decades of judicial precedent treat games of skill as distinct from gambling, and that GST should apply only to platform commissions (currently taxed at 18 percent), not the full entry amount.
Beyond the legal nuance, the case carries enormous financial consequences. Since October 1, 2023, the GST authorities have issued show-cause notices totalling over ₹1.12 lakh crore to more than 70 gaming operators. A ruling in the Centre’s favor would cement a 28 percent levy on the full “buy-in”, dramatically raising costs for players and potentially stalling user growth in a market that recorded tens of millions of active users and generated several thousand crores in gross gaming revenue in FY 2024–25. Upholding the skill–chance distinction and limiting GST to net gaming revenue could preserve lower tax rates on operator commissions, keeping gaming more affordable and attractive to both users and investors.
Why the skill vs. chance debate matters
Indian law has long exempted games “predominantly” based on skill from gambling statutes—on the premise that skill-based contests do not fall under “actionable claims” the way wagers do. The government’s position flips that logic: it treats any monetary stake in a contest as a taxable gamble. How the Court defines the boundary between skill and chance will determine not only tax liabilities, but also the broader regulatory framework under which this fast-growing digital sector operates.
Industry impact of differing GST models
- 28 percent on full stakes: Raises effective costs for players, likely reduces average bet sizes, dampens new user acquisition, and may drive some operators to offshore jurisdictions or push players toward informal, unregulated platforms.
- 18 percent on net gaming revenue (commissions): Lowers barriers to entry for casual and high-frequency players, supports sustainable growth for domestic platforms, and encourages fresh investment in game development and compliance infrastructure.
As the Supreme Court readies a judgment expected shortly after hearings conclude, the outcome will shape the future of online gaming in India—balancing revenue collection, consumer protection, and the sector’s long-term vitality.
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