GST on Online Gaming: Supreme Court Upholds 28% Tax on Full Bet Value as ₹1.1 Lakh Crore in Demands Move to Adjudication

NEW DELHI — Five months after the Supreme Court upheld the levy of 28 per cent GST on the full face value of bets placed on online money gaming platforms, the roughly ₹1.1 lakh crore in show-cause notices issued for the period before October 2023 have returned to the adjudicating authorities, and the companies that received them are confronting demands that, by the industry's own account, exceed its entire revenue since inception. The judgment of 27 May 2026 in Gameskraft Technologies and connected matters settled the law; what remains is the arithmetic.

"The industry says the demands exceed its entire revenue since inception," a tax adviser to several of the platforms told The Counsel. "The judgment leaves adjudication to the authorities, and that is where the next two years will be spent."

What the Supreme Court decided

1. Suppliers, not intermediaries. The platforms argued that they merely provided the technology on which players bet against each other and that their only supply was the platform fee. The court held that an operator which controls the game, the prize pool and the players' wallets is the supplier of an actionable claim to each player, and that the claim is one arising from betting and gambling.
2. Skill does not matter for GST. The skill-versus-chance distinction, decisive under state gaming statutes since R.M.D. Chamarbaugwala (1957), does not govern the tax. Where money is staked on the outcome of a game, the court held, the transaction is betting for the purposes of the GST entries whatever the skill involved.
3. Full face value. The valuation rules that take the total amount staked, rather than the operator's commission, as the value of supply were upheld, both as they stood before October 2023 and as amended.
4. Retrospective demands stand. The 2023 amendments to the CGST and IGST Acts, which defined online money gaming and specified actionable claims, were held to clarify rather than create the liability; notices for earlier periods are valid. The Karnataka High Court's May 2023 judgment quashing the ₹21,000 crore notice to Gameskraft was set aside and the notice restored.

In a companion judgment the court upheld the Tamil Nadu and Karnataka laws prohibiting online games played for stakes, affirming the states' power to regulate or ban online money gaming.

The industry says the demands exceed its entire revenue since inception.

A tax adviser to the platforms, to The Counsel

How the dispute arose

• 2017–22 — The Directorate General of GST Intelligence issues notices to money-gaming operators demanding 28 per cent on the full value of stakes, treating the games as betting and gambling.
• 11 May 2023 — The Karnataka High Court quashes the ₹21,000 crore notice to Gameskraft, holding that rummy is a game of skill and not betting.
• Jul–Aug 2023 — The GST Council recommends 28 per cent on the full face value of online money gaming, casinos and horse racing; Parliament amends the CGST and IGST Acts with effect from 1 October 2023.
• Sept 2023 — The Supreme Court stays the Karnataka judgment and later transfers the writ petitions pending in eleven High Courts to itself.
• Aug 2025 — Hearing concludes; judgment reserved. Parliament passes the Promotion and Regulation of Online Gaming Act, 2025.
• 22 Sept 2025 — The GST rate on specified actionable claims is raised from 28 to 40 per cent.
• 1 May 2026 — The 2025 Act and its Rules come into force, prohibiting online money games.
• 27 May 2026 — The Supreme Court upholds the levy and restores the notices.

What happens to the ₹1.1 lakh crore

The judgment restores the notices but does not quantify liability. Each notice now proceeds to adjudication under Section 74 of the CGST Act before the officer who issued it, and the operators are expected to contest the computation on grounds the court left open: whether deposits that were never staked form part of the value, whether the same stake was counted more than once as it moved between players, and how interest and penalty are to be applied to a period in which the law was contested in good faith. The tax adviser quoted above estimated that interest alone would exceed the principal in several of the older notices.

Several operators have said publicly that they are examining review petitions. A review lies only on narrow grounds, and the court's reasoning on the character of the supply leaves little room; the more realistic arena is the adjudication itself and the appeals from it to the GST Appellate Tribunal.

A tax on an activity that is now banned

The ruling arrived three weeks after the Promotion and Regulation of Online Gaming Act, 2025 came into force. Section 5 of that Act prohibits the offering of online money games altogether, while Sections 3 and 4 promote e-sports and online social games without stakes. The 40 per cent rate that replaced 28 per cent in September 2025 therefore applies to online money gaming only for the period between September 2025 and April 2026, and to casinos, betting and the other specified claims thereafter. A challenge to the 2025 Act under Article 19(1)(g), transferred to the Supreme Court from three High Courts in September 2025, remains pending; the companion judgment upholding the state prohibitions is widely read as an indication of the outcome.

What it means

• For operators: the liability for past periods is a matter of quantum, not principle. Provisions in accounts, negotiation of payment schedules and challenges to the computation are the remaining tools; the amnesty scheme under Section 128A does not extend to notices issued under Section 74.
• For investors: the valuations of listed and venture-backed companies in the sector already reflect the prohibition; the judgment fixes the size of the legacy liability that any restructuring must address.
• For players: the Act, not the tax, now governs; money games are unavailable on Indian platforms, and winnings from past play remain taxable under Section 115BBJ of the Income-tax Act.
• For other sectors: the court's treatment of a platform as the supplier of what passes across it, rather than as an intermediary, will be cited in disputes over marketplaces, aggregators and payment platforms.

The Counsel will report the adjudication orders and any review petitions as they are decided. Operators and investors affected by the ruling should take advice from a qualified GST practitioner on the computation of liability and the appellate route.

This report is for general information only and does not constitute legal advice. Readers should consult a qualified lawyer about their own circumstances. Case citations are to The Counsel Reports (TCR) unless otherwise stated.