Supreme Court Upholds GST on Online Gaming and Rejects Casino Industry's Net Revenue Argument

Court : Supreme Court

Brief :

The matter before the Supreme Court concerned the applicability and valuation of Goods and Services Tax (GST) on activities such as online gaming, fantasy sports, casinos, and horse racing, where participants place stakes on uncertain outcomes. The gaming and casino operators argued that GST should be levied only on the Gross Gaming Revenue (GGR) or the net amount retained by them after distributing winnings to players. They contended that tax liability should be based on their actual earnings rather than the total value involved in the gaming transaction.

The Government, on the other hand, maintained that GST is a tax on the supply of actionable claims and gaming activities involving stakes, and therefore the valuation should not be restricted to the operator's net revenue.

 

Issue Before the Court

Whether GST liability on online gaming, fantasy sports, casinos, and similar activities should be computed on the net revenue/profit retained by the operator (GGR) or on the value prescribed under the GST law for such supplies.

Citation :

Gameskraft Technologies Pvt. Ltd. & Connected Matters vs Directorate General of GST Intelligence

(DGGI) & Others (related batch of cases on Online Gaming, Casinos and Horse Racing)

Judgement :

The Supreme Court rejected the contention of casino and gaming operators that GST should be levied only on the net outcome or profit earned from gaming activities. The Court observed that GST is a tax on the supply of goods or services and not a tax on profits or earnings.

The Court held that participation in games involving stakes on uncertain outcomes constitutes a taxable supply under the GST framework. Accordingly, the levy of GST cannot be confined merely to the revenue retained by the operator after payment of winnings.

While examining the Gross Gaming Revenue (GGR) model used by casinos, the Court concluded that GST liability must be determined in accordance with the statutory provisions governing valuation under the GST regime and not solely on the basis of the operator's profit margin.

Key Observation

"GST is a tax on supply and not on profits. The taxable event is the supply involved in the gaming transaction and not merely the net earnings retained by the operator."