“A rule made for gambling is now being used against games of skill — and the result is that the gaming industry itself has become a game inside India’s courts.”
Introduction: A Legal Crossroad for India’s Digital Economy
On May 13 and 14, 2025, the Supreme Court of India heard decisive arguments in the Gameskraft batch of cases, which may forever change the tax landscape of India's ₹2.5 lakh crore online gaming industry. At the heart of the dispute is whether games of skill, such as rummy and fantasy sports, should be treated as betting and gambling for the purposes of 28% GST under Rule 31A of the CGST Rules.
With Senior Advocates Dr. Abhishek Manu Singhvi and Harish Salve leading the charge for the gaming companies, this is not merely a tax case — it's a litmus test for constitutional interpretation, digital regulation, and economic policy in a fast-evolving digital India.
The Legal Stages Unfolding in Court
Stage 1: Dr. Singhvi — Defending the Doctrine of Skill
Dr. Singhvi opened the arguments by grounding his case in settled Supreme Court precedent. Relying on landmark rulings such as:
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RMD Chamarbaugwala (1957)
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State of Andhra Pradesh v. Satyanarayana
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K.R. Lakshmanan v. State of Tamil Nadu
He argued that the distinction between games of skill and games of chance is long-standing and judicially established. A game in which skill predominates over chance is not gambling, and hence, cannot be taxed under a rule meant for betting and lotteries.
He further noted that some High Courts have misapplied these precedents by cherry-picking portions of judgments and ignoring the constitutional and legal principles that underlie them.
Stage 2: Harish Salve — Striking at Rule 31A’s Core
Next, Harish Salve delivered a methodical and fierce critique of the government's position. His arguments focused on how Rule 31A is being misused to impose 28% GST on the entire prize pool of skill-based games:
Key Submissions:
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No Supply, No Service:
Online platforms simply facilitate peer-to-peer gameplay. They do not supply goods, nor do they offer a service with guaranteed outcomes. The relationship is among players, not between player and platform. -
Misclassification of Entry Fees as ‘Actionable Claims’:
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Players pay entry fees into an escrow account.
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These funds are redistributed among winners.
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The platform retains only ~10% as facilitation charges.
Hence, there is no actionable claim transferred to the platform — unlike a lottery or gambling operator.
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Rule 31A – An Overreach:
Salve branded Rule 31A as a “colourable exercise of legislative power”, originally intended for lotteries, gambling, and betting. Applying it to games of skill is legally impermissible and structurally incompatible. -
Constitutional Breakdown Post-101st Amendment:
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After the 101st Constitutional Amendment, the power to tax gambling and betting under Entry 62 of the State List was stripped from the States.
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The petitioners argue that using GST (a concurrent power) to reintroduce that tax through executive rules like 31A is unconstitutional.
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Any such taxation, if valid, would need to be sourced from Entry 97 of the Union List, requiring clear legislative sanction — not mere delegated rule-making.
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Critical Analysis: A Tax Battle or a Constitutional Crisis?
| Legal Issue | Petitioners’ View | Government’s Position |
|---|---|---|
| Classification as ‘Gambling’ | Not applicable to games of skill per SC precedents | All real-money games involving prize pools qualify |
| Nature of Entry Fees | Peer-to-peer redistribution, not a service | Entry into prize pool = actionable claim |
| GST on Full Pool vs. Net Revenue | Unjust to tax 100% when operator earns ~10% | Rule 31A allows such taxation |
| Legislative Power (Post 101st Amendment) | Taxing betting now lies only with Parliament, not via rules | Council + delegated rules sufficient |
A Misplaced Rule in a Fast-Moving Sector
Rule 31A was never designed for tech-driven, skill-based platforms. Its current use equates the operator of a fantasy league to a casino. It penalises innovation, overstates tax liability, and blurs fundamental legal distinctions.
What’s worse is that it erodes constitutional federalism. After the 101st Amendment, gambling is a Union subject in practice — yet, via Rule 31A, the State-like power to tax gambling is being exercised again through GST mechanisms.
Bigger Questions for India’s Digital Future
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Can platform-based digital services be taxed as if they were casino halls or lotteries?
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Should delegated rules override Constitutionally interpreted categories?
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Is this a taxation issue, or a structural crisis in the way India is adapting old laws to new-age digital businesses?
These are not just legal technicalities — they are questions of policy, predictability, and investor confidence.
🧩 Conclusion: Courts as Arenas, and Games as Stakes
The Indian online gaming sector now stands trial — not for violating the law, but for being misclassified under a law that doesn’t fit. When a rule made for gambling is used against games of skill, it is not only a legal mismatch — it becomes a policy blunder with massive economic fallout.
“India must decide — are we taxing innovation, or are we merely failing to understand it?”
