Year after SC hearing, ₹2.5 L Cr GST sword still hangs over real money gaming industry

India’s real money gaming (RMG) industry anxiously awaits the Supreme Court verdict in the ₹2.5 lakh crore Goods and Services Tax (GST) dispute that could determine the survival of companies, industry executives and legal experts said.

A Supreme Court bench comprising Justices JB Pardiwala and R Mahadevan had reserved its judgment almost a year back in the closely watched online gaming GST matter, where the central question is whether online skill gaming platforms should be taxed at 28% on the entire contest entry amount pooled from users or only on the platform fee retained by operators.

The case has far-reaching implications for India’s online gaming ecosystem, which has already been battered by recently enacted Promotion and Regulation of Online Gaming Act which tightened regulations, investor caution and a broader crackdown on money-based gaming formats.

Read more on betting case: ED raids multiple locations

The dispute revolves around tax demands running into nearly ₹2.5 lakh crore raised against online real money gaming companies. The petitioners include companies such as Gameskraft and Delta Corp, along with members of industry bodies, including All India Gaming Federation, E-Gaming Federation and Federation of Indian Fantasy Sports.

Industry fears existential fallout

The industry has argued that games involving a preponderance of skill cannot be equated with betting and gambling, and therefore taxing the full face value of deposits is legally untenable and economically devastating.

“The verdict has become existential for the companies as PROGA already led shutting down of business but GST case judgement is adverse, all the companies will file insolvency at the NCLT,” said the founder of a leading gaming platform, requesting anonymity. 

Read more on gaming's big reset

“Most companies operate on thin margins where the actual revenue is only the platform commission. If the entire pooled amount is retrospectively taxed at 28%, many firms will simply not survive.”

Another gaming startup founder said investors have already slowed funding amid regulatory uncertainty.

“The industry is facing a double whammy of operational restrictions and tax overhang. Everyone is waiting for the Supreme Court judgment before making long-term business decisions,” the founder said.

PROGA refund rules: User funds in limbo. Read more here

The matter saw an elite line-up of senior advocates appearing for the gaming industry, including Harish Salve, Abhishek Manu Singhvi, Mukul Rohatgi, C. Aryama Sundaram, Sajan Poovayya, Vikram Nankani, Arvind Datar, Dhruv Mehta, Gopal Sankarnarayanan and Balbir Singh. The Union government was represented by Additional Solicitor General N. Venkatraman.

Legal battle over games of skill

Shashi Mathews, partner at CMS INDUSLAW, said the key issue before the apex court was whether games of skill could legally be treated on par with gambling merely because money was involved.

“The Tax Department’s case is that once money is involved then irrespective of skill, the game becomes one of chance or one that involves betting and gambling and therefore on the entire value of the bet, 28% GST should be levied,” Mathews said.

He added that if the ruling goes against gaming companies, the tax impact could far exceed their actual earnings because most platforms only retain around 10% of the total user pool as platform fees.

“The government wants to tax the entire stakes played on a platform. This money has never even touched these companies, so in effect they will have to pay these tax amounts from their own funds,” he said.

Industry executives said the uncertainty has worsened after the implementation of the Online Money Gaming Ban framework announced in August 2025, which came into force from May 2026 and triggered shutdowns and restructuring across several gaming firms.

Retrospective tax demands worry sector

Snigdhaneel Satpathy, partner at Saraf and Partners, said retrospective tax demands dating back to 2017 represented the “most existential risk” for the industry.

“For operators that have already curtailed operations, an adverse GST ruling, especially with retrospective effect, could crystallise legacy liabilities without a viable revenue base to absorb them, raising concerns around solvency and investor exposure,” Satpathy said.

He noted that while judicial precedents distinguishing games of skill from gambling could support the industry’s case, the sector still faces uncertainty from evolving regulatory restrictions.

“Even a favourable judgment may offer only partial relief, as the real question then shifts from tax viability to regulatory permissibility in a post-prohibition landscape,” he said.

Ritesh Kanodia, partner at Aurtus Legal, said the industry’s case was strengthened by the argument that the 2023 GST amendments were prospective and substantive in nature, making retrospective application difficult.

“These considerations provide the industry with a credible pathway to a favourable ruling on both characterisation and valuation, or at the very least, a meaningful reduction in historical liabilities,” Kanodia said.

However, he cautioned that even a favourable verdict may not fully revive the sector if future legislation imposes stringent curbs on money-based gaming.

Courts may weigh legal certainty

Sonam Chandwani, managing partner at KS Legal & Associates, said long-standing jurisprudence has consistently distinguished games of skill from gambling activities.

“RMG platforms do not appropriate the pooled prize money as revenue; they merely act as intermediaries facilitating contests while retaining a pre-declared platform fee. Taxing the entire deposit amount could therefore be argued as contrary to the architecture of value-added taxation,” Chandwani said.

She added that retrospective imposition of massive liabilities in a sector that operated for years under an accepted industry practice raised concerns around proportionality, legal certainty and legitimate expectation.

Legal experts also pointed to the fact that the GST Council eventually amended the law prospectively, which could indicate that the earlier framework lacked clarity — a factor that may weigh with the Supreme Court while deciding historical liability.

For the gaming industry, however, the verdict represents far more than a tax dispute. Executives said it could determine whether India remains a viable market for skill-based online gaming businesses or becomes a cautionary tale for global digital investors.