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Business Standard
22-07-2025
- Business
- Business Standard
Bet value doesn't qualify as income under I-T Act: Egaming firms to SC
The bet money placed by users in online real-money games (RMG) is neither accrued nor received by casinos and, therefore, should not be considered as income under the Income Tax Act, RMG intermediaries told the Supreme Court on Tuesday. As per the Income Tax Act, a consideration is defined by law as any sum or value that is either received or recoverable from a user or a client in return for a service that has either been provided or will be provided. Since online RMGs do not accrue or receive the monies deposited by users for themselves, it cannot be considered taxable income, the counsel for the companies told the Court. He further explained that when people play against the casinos, they settle with the winners and losers and then take whatever is left as surplus. "We are not valuing the bet but the right to win. It's a different concept from bet far as the face value of the bet is concerned, it belongs to the winner," he said. The court will continue hearing online RMGs' arguments until Friday. In the last hearing, the companies had argued that the GST provisions before October 2023 were inadequate to impose a 28 per cent tax on online gaming operators in the manner attempted by the authorities. The government's reliance on Rule 31A of the GST Rules (value of supply in case of lottery, betting, gambling, and horse racing), introduced in 2018, was challenged because it lacked statutory authority under the Central GST (CGST) Act, the companies had said. On Tuesday, online RMGs also contended that attempts to tax actionable claims like betting and gambling as 'goods' by amending the Goods Rate Notification were flawed. Until October 1, 2023, there was no entry for actionable claims in the Customs Tariff Schedule, making their classification as goods unsustainable under GST. The petitioners (online gaming companies) explained to the court the distinction between platform fees, on which GST is already paid, and prize pool contributions made by players, which are held in trust and returned to winners. They claimed that prize pool contributions do not constitute consideration and thus cannot be taxed under GST. In the case of online games, they argued that these games are played against each player, with the online gaming operator merely providing platform services, and that the platform operator, as the supplier of platform services, has discharged GST during the relevant period at the specified rate. The division bench of Justices J B Pardiwala and R Mahadevan is hearing the case, which deals with the absence of clear taxing provisions to enforce tax collection before the October 2023 overhaul. The case, with an estimated financial impact of Rs 2.5 trillion, is one of the biggest tax battles in India's history. The matter will continue on Wednesday.
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Business Standard
22-07-2025
- Business
- Business Standard
Online RMGs tell SC bet money is not taxable income under Income Tax Act
The bet money placed by users in online real-money games (RMG) is neither accrued nor received by casinos and, therefore, should not be considered as income under the Income Tax Act, RMG intermediaries told the Supreme Court on Tuesday. As per the Income Tax Act, a consideration is defined by law as any sum or value that is either received or recoverable from a user or a client in return for a service that has either been provided or will be provided. Since online RMGs do not accrue or receive the monies deposited by users for themselves, it cannot be considered taxable income, the counsel for the companies told the Court. He further explained that when people play against the casinos, they settle with the winners and losers and then take whatever is left as surplus. "We are not valuing the bet but the right to win. It's a different concept from bet far as the face value of the bet is concerned, it belongs to the winner," he said. The court will continue hearing online RMGs' arguments until Friday. In the last hearing, the companies had argued that the GST provisions before October 2023 were inadequate to impose a 28 per cent tax on online gaming operators in the manner attempted by the authorities. The government's reliance on Rule 31A of the GST Rules (value of supply in case of lottery, betting, gambling, and horse racing), introduced in 2018, was challenged because it lacked statutory authority under the Central GST (CGST) Act, the companies had said. On Tuesday, online RMGs also contended that attempts to tax actionable claims like betting and gambling as 'goods' by amending the Goods Rate Notification were flawed. Until October 1, 2023, there was no entry for actionable claims in the Customs Tariff Schedule, making their classification as goods unsustainable under GST. The petitioners (online gaming companies) explained to the court the distinction between platform fees, on which GST is already paid, and prize pool contributions made by players, which are held in trust and returned to winners. They claimed that prize pool contributions do not constitute consideration and thus cannot be taxed under GST. In the case of online games, they argued that these games are played against each player, with the online gaming operator merely providing platform services, and that the platform operator, as the supplier of platform services, has discharged GST during the relevant period at the specified rate. The division bench of Justices J B Pardiwala and R Mahadevan is hearing the case, which deals with the absence of clear taxing provisions to enforce tax collection before the October 2023 overhaul. The case, with an estimated financial impact of Rs 2.5 trillion, is one of the biggest tax battles in India's history. The matter will continue on Wednesday.
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Business Standard
15-07-2025
- Business
- Business Standard
Levy of 28% GST on online money gaming flawed, firms tell Supreme Court
Online real-money gaming companies on Tuesday opposed the imposition of a 28 per cent Goods and Services Tax (GST) on their services, arguing that the levy was fundamentally flawed and contrary to the legal framework. Senior advocate V Sridharan, appearing for the online gaming companies (petitioners), argued that the GST provisions before October 2023 were inadequate to impose a 28 per cent tax on online gaming operators in the manner attempted by the authorities. The government's reliance on Rule 31A of the GST Rules—pertaining to the value of supply in cases of lottery, betting, gambling and horse racing—was challenged on grounds that the rule lacked statutory authority under the Central GST Act. Sridharan argued that Rule 31A, which prescribed the valuation method for betting and gambling, did not comply with the mandatory two-step process under Section 15(5) of the CGST Act. Specifically, the rule was issued without first notifying 'actionable' claims as taxable supplies, rendering it ineffective and invalid, he said. He contended that attempts to tax actionable claims such as betting and gambling as 'goods' by amending the Goods Rate Notification were flawed. Until 1 October 2023, there was no entry for actionable claims in the Customs Tariff Schedule, making their classification as goods unsustainable under GST. The petitioners also argued the distinction between platform fees—on which GST is already paid—and prize pool contributions made by players, which are held in trust and returned to winners. The petition claimed that these deposits do not constitute consideration and thus cannot be taxed under GST. In online games, players compete against each other, while the operator merely provides the platform, the gaming companies submitted. As the supplier of platform services, the operator had discharged GST during the relevant period at the applicable rate. 'However, the operator does not make any other supplies and only holds the prize pool as a deposit to be settled in favour of the winner, who is decided between the players. Thus, the operator cannot be made liable for supplies made inter se between the players,' Sridharan said. The division bench of Justices J B Pardiwala and R Mahadevan asked whether the entire game would be treated as a single transaction, to which Sridharan replied, 'GST is a contract-based tax.' The case highlights the absence of clear taxing provisions to enforce GST collection before the October 2023 overhaul. The petitioners concluded that attempts to retroactively impose GST without statutory backing violate fundamental tax principles and must be struck down as ultra vires. The Supreme Court has scheduled 25 July 2025 as the date for the final hearing in the case, which involves show-cause notices issued to several online gaming firms. With an estimated financial impact of ₹2.5 lakh crore, the case ranks among the largest tax battles in India's history. The matter will continue on Wednesday.
