Prologue
In a matter of few days1 the Supreme Court is likely to deal with the challenge by the online gaming industry to the stance of the goods and services tax (GST) authorities. At a broad level, the dispute pertains to classification and valuation of online gaming supplies under GST laws. Much closer, the dispute is indeed intricately complex as it inter alia involves: (a) interpretation of the GST laws; (b) reappreciation of archaic legal concepts (such as “actionable claim”); (c) vivisection of scores of judicial precedents seeking to distinguish recreational activities between games of “skill” versus “chance”, besides the fact that quantum of tax involved in the dispute is very likely to overwhelm any previous tax case contested in Indian courts. While the Karnataka High Court has already ruled in favour of the industry and it hopes for further vindication by the Supreme Court, this matter is unlike a typical appeal before a superior court because the issue has gained far more complexity in view of various subsequent statutory amendments effected in the GST laws during the interregnum of the dispute. The online gaming industry has challenged these amendments as well, which are likely to be considered by the Supreme Court along with the original dispute. This article traces the contours of the controversy and carries reflection on the formidable arguments across the aisle in this complex tax controversy.
Introduction: Delineating the broad issues
It is critical to appreciate that the controversy, typical of any tax dispute, is not a simple one; there are many layers of complex variables which need to be delineated. There is no doubt that GST is a tax on “supply”, because: (a) the Constitution defines GST to mean “any tax on supply of goods, or services or both”;2 and (b) even the Supreme Court has declared that GST is a tax on supply.3 Nonetheless, it is mandatory to appreciate the intrinsic nature and classification of online gaming activity because the GST laws stipulate different tax rates and consequences for different species of supplies. Thus, whether online gaming is goods or services, whether it is in the nature of betting and gambling, etc. are critical questions requiring dissection, in order to crystalise the exact nature of online gaming as a “supply” in the GST paradigm.
Another bouquet of questions arises because of the subsequent legislative interventions in the GST laws, pursuant to recommendations of the GST Council. There have been essentially two broad types of amendments to the GST legislative framework; (a) amendment to the GST Rules to specify the taxable value; and (b) amendment to the GST legislations to specifically institute the concept of “online money gaming”. A related question is the effective date of these amendments i.e. whether the changes introduced in the law are prospective or would relate back to the past and thus operate retrospectively.
To clarify, the aforesaid questions are only illustrative as there are multitudes of complex issues requiring delineation in view of the rival contentions of the online gaming industry and the Tax Department. Each of these questions require careful and minute appreciation of the statutory framework of the GST laws in the wake of overarching judicial stipulations in both pre-GST and post-GST legal paradigm.
Game of skill versus game of chance: A critical question
Traditionally the online gaming industry has been paying GST considering its activity as a service, taxable at 18% GST. This characterisation has been disputed by the GST authorities, who choose to characterise it as betting and gambling activity and hence taxable at 28% GST. To appreciate the rationale for this difference of approach, one needs to deep dive in the scheme of the GST legislation.
Under the Central Goods and Services Tax Act, 20174 (CGST Act) the charging provision provides for levy of GST on supply.5 The expression “supply” is defined6 wherein it is specifically provided that it shall exclude “activities or transactions specified in Schedule 37” of the CGST Act.8 It is noteworthy that this carveout of Schedule 3 activities is accompanied by a non obstante clause9 which, in technical legal terms, implies that the exclusion of Schedule 3 activities shall override any other contrary provision of the GST legislations.10 Therefore, if an activity or transaction is enlisted in Schedule 3 of the CGST Act then it shall not be considered a supply and would be outside the levy of GST.
This scheme of “supply” becomes critical because in the original CGST Act, Schedule 3 enlisted “actionable claims, other than lottery, betting and gambling” as one species of activities and transactions outside the scope of GST.11 Thus, while actionable claims12 are generally excluded from GST, one of their species — i.e. lottery, betting and gambling — is nonetheless covered within GST. However, what constitutes betting and gambling activity is not defined in the GST laws.
Owing to the absence of a specific legislative provision, in order to appreciate whether the GST authorities are correct and whether online activity is indeed betting and gambling activity, one is required to deep dive in the decades old jurisprudential delineation of “game of skill” versus “game of chance”, because it is this test which has been evolved by the judiciary to distinguish between betting and gambling activities from others.13
Faced with the investigations and notices demanding GST on the premise that their activities constituted betting and gambling, the online gaming industry challenged the GST proceedings. Accepting the interpretation put forth by the industry, the Karnataka High Court in a detailed decision allowed the writ petitions and quashed the action of the GST authorities.14 The High Court made a critical observation that because the expression “betting and gambling” was not defined in the GST laws, it must be ascribed the prevailing judicial meaning. Wading through the labyrinth of judicial exposition on the subject and summarising scores of decisions, the High Court concluded that “betting and gambling” activity “does not and cannot include games of skill within its ambit”. Furthermore, the High Court arrived at a categorical conclusion that “there is a distinct difference between games of skill and games of chance” and various online games as such were games of skill and thus were not subject to GST.
Interestingly, the foregoing conclusion is also aligned with the definition of “betting and gambling” under the pre-GST indirect tax regime i.e. under the service tax laws — which similarly excluded levy of service tax on betting and gambling. In fact, there was far more clarity in the service tax regime insofar as the law specifically enacted a definition of betting and gambling, which was directly linked to games of chance.15 Thus, the pre-GST legislation enacted by the Parliament itself reveals that the underlying legislative understanding has always been to appreciate betting and gambling in the judicially canvassed test of games of chance. The fact that such legislative clarity in the service tax regime is not clearly evident in the GST legislations is only a moot point considering the well-known principle of statutory interpretation that “use of same words in similar connection a later statute gives rise to a presumption that they are intended to convey the same meaning as in the earlier statute”.16 Thus, the decision of the Karnataka High Court appears to further the consistent meaning of the expression “betting and gambling” in the indirect tax regime as well. Nonetheless, its correctness would indeed be considered by the Supreme Court.
The pending dispute before the Supreme Court primarily arises on account of the appeal filed by the GST authorities questioning the correctness of the Karnataka High Court’s decision. It is interesting to note that the key argument put forth by the GST authorities in the initial hearing before the Supreme Court appears to draw strength from an earlier decision in Skill Lotto Solutions (P) Ltd. v. Union of India17 in which levy of GST on lotteries was approved by the Supreme Court.18 This stand of the GST authorities is curious because there is a world of difference between lottery, which undoubtedly is gambling, vis-à-vis the plenitude of online games in question which require talent, expertise and hordes of experience to succeed, clearly evidencing a predominance of “skill” instead of a simple bet running on plain stroke of luck in case of a lottery.
Issue of GST valuation
A concomitant issue which arises is relating to the value on which GST should be paid on online gaming (i.e. the taxable base for GST purpose). To appreciate this aspect, another feature of the GST legislative scheme needs to be appreciated.
Section 15(1)19 of the CGST Act provides that “transaction value” i.e. “the price actually paid or payable” for a supply in case of unrelated parties shall form the value for determining applicable GST. If this provision is applied, what an online gaming player actually pays to the online gaming platform for the platform’s facilitation services shall form the value on which GST would be payable. However, Section 15(5) of the CGST Act permits the Government to notify a special valuation mechanism upon the recommendation of the GST Council. Exercising this empowerment, Rule 31-A of the Central Goods and Services Tax Rules, 2017 (CGST Rules) has been notified which stipulates the manner to determine the “value of supply in case of lottery, betting, gambling and horse racing”. In terms of Rule 31-A(3), “the value of supply of actionable claim in the form of chance to win in betting, gambling … shall be 100% of the face value of the bet”.
The Bombay High Court has already declared against the application of Rule 31-A(3) because the provision is limited to gambling activity whereas success in online games “depends upon user’s exercise of skill based on superior knowledge, judgment and attention, and the result thereof is not dependent on the winning or losing of a particular team in the real world game on any particular day. It is undoubtedly a game of skill and not a game of chance”.20 Nonetheless, notices have been issued by the GST authorities seeking to levy GST on online gaming activities, basis this Rule 31-A(3). The online gaming industry has taken objection to the application of Rule 31-A and challenged the notices by way of writ petitions before various High Courts.21 In certain cases, writ petitions have also been filed directly before the Supreme Court — seeking to invoke its extraordinary jurisdiction under Article 3222 of the Constitution — all of which will now be heard together by the Supreme Court.
While the main challenge to Rule 31-A(3) is pedestaled on the ground that online gaming is not a species of gambling, even if it applies, another aspect which has been challenged by the online gaming platforms is that the provision is fundamentally flawed because it compels payment of GST on a notional value with no nexus with the taxable event (namely, in the context of pre-2023 Amendment, the provision of information technology enabled facilitation services by the online gaming platforms). The provision mandates that irrespective of the amount received from a player as a service fee, the online gaming supplier must charge GST on the entire betting amount. This implies, for illustration, any promotional discount extended by the supplier, etc. is not available as a deduction. Thus, the industry is objecting to the manner in which the tax liability is computed. According to the GST authorities, the entire amount collected by the online gaming platforms is subject to GST rejecting the industry’s position which pays tax on the platform fee i.e. its collection towards facilitating the gamers. Thus, curiously, even the award money (i.e. winnings) which is shelled out by the gaming platform to the winners, is also counted as the “turnover” of such platform by the GST authorities and GST is required to be paid even on such amounts which do not accrue to the gaming platforms.
An example assists in appreciating the extent of this provision. A player enjoins the platform upon payment of INR 100 in an online car racing game with assured payment of INR 190 in case of win. The gaming platform facilitates this race by identifying another player seeking to play a similar game. Thus, the gaming platform is in receipt of INR 200. Upon the conclusion of the game, it remits the winner with the assured winning amount. Thus, the platform is left with INR 10, which represents its consideration for facilitating the online game. If Section 15(1) is to be applied, then the online gaming platform would pay GST on this INR 10. However, if the special valuation provision is applied, then the online gaming platform would pay GST on this INR 200. This valuation mechanism, therefore, adopts a taxable base which steeply undercuts the very business model of the online gaming industry.
It is therefore not surprising that various online gaming players have also challenged the GST authorities’ actions. In fact, the ground of challenge is not just relating to the fairness of the valuation scheme but also to the fact that subsequently inserted valuation provision is sought to be applied for the past. Thus, the challenge is also to the retrospective application of the valuation provision, which is curious because “[i]t is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect. There is a presumption of prospectivity articulated in the legal maxim nova constitutio futuris formam imponere debet non praeteritis i.e. ‘a new law ought to regulate what is to follow, not the past’.”23
2023 legislative amendment expanding scope of GST qua online gaming
While the challenges to the stance of GST officers were pending consideration of the courts, acting on the basis of the GST Council’s recommendations, the Parliament introduced a host of amendments to the GST legislations, all of which came into effect from 1-10-2023.24 These amendments have introduced a new legislative scheme qua online gaming. These amendments have also been challenged before various High Courts, which challenge has been clubbed along with the pending petitions before the Supreme Court. Thus, effectively there are two categories of disputes before the Supreme Court; pre and post-October 2023 Amendment. Given that the Supreme Court is likely to consider the validity and contours of these amendments, it is expedient to appreciate their canvass.
(1) For the first time, in October 2023, concept of “online money gaming” has been introduced as a new species of supply25 along with a distinct charging provision qua foreign gaming platforms.26 This new concept is a subset of online gaming and, broadly speaking, seeks to cover within its scope online games which are played “in the expectation of winning money or money’s worth”.
(2) Earlier all actionable claims (other than lottery, betting and gambling) were excluded from GST.27 After the amendment, a new species of “specified actionable claim” has been created and this species is also excluded from the scope of actionable claim. Put differently, now only those actionable claims are excluded from GST which are not in the nature of “specified actionable claim”. To this end, “online money gaming” has been enlisted as a specified actionable claim besides lottery, betting, gambling, casinos, etc.28 Thus, despite the fact that online games are so far considered games of skill (and not games of chance like gambling activities), the online gaming activity has been positioned alongside those the betting and gambling activities which have traditionally been considered pernicious.29
(3) A deeming fiction has been introduced to the effect that online gaming platforms shall be considered supplier of specified actionable claim, and they are made liable to discharge GST.30
Parallel to the aforesaid amendment to the GST legislations, effective from the same date, a new valuation mechanism has also been introduced — Rule 31-B — which determines the value of supply in case of online gaming to stipulate that “the total amount paid or payable to or deposited with the supplier … by or on behalf of the player” shall constitute the value of supply of online gaming. Thus, while the position emerging earlier under Rule 31-A(3) appears to have been perpetuated by Rule 31-B, the new provision goes beyond to declare that the amount returned or refunded by the supplier to the player for any reasons whatsoever, including player not using the amount paid or deposited with the supplier shall not be deductible from the value of supply.
It is in the aforesaid background that the levy of GST on online gaming activity has been challenged across various forums on a wide variety of legal grounds. Considering that the challenges were pending across the country, the Supreme Court has allowed the request of the Government to club all these matters and consider them comprehensively to categorically address the issues on all fours. Thus, all the issues are likely to be considered by the Supreme Court in the upcoming hearings.
Appreciating the soundness of the challenge
In view of the complex legal regime and issues relating to taxes on betting and gambling having been extensively addressed by the judiciary in the past, there are a host of legal grounds which are likely to be canvassed in the proceedings. Many of these grounds have already been noticed in the publicly available judicial orders, hence, it is expedient to enlist these for ease of consideration:
(a) 2023 Amendment does not address the past.— One aspect of the challenge is that the 2023 Amendment to the GST laws, in the absence of explicit retrospectivity, is prospective. There appears to be fortitudinous in the argument that the amendment should not apply to the pre-2023 services provided by online gaming platforms, in view of the categorical enunciation of the legal position by a larger Bench31 of the Supreme Court that there cannot be implied retrospectivity in tax legislations.32 This decision also postulates “doctrine of fairness” as a newly installed pivot in principles governing statutory interpretation of fiscal legislations to conclude that a new tax liability cannot be created on retrospective basis in the absence of specific legislative intent to such effect. In any case, it is now firmly settled that a new substantive tax liability is prospective in absence of specific retrospective legislation.33
(b) Pre-2023 Amendment: Online gaming as games of skills.— Considering that the 2023 Amendment does not apply for addressing the past, the question which will continue to be addressed is whether skill-based online gaming played with monetary stakes per se qualify as games of chance so as to be exigible to tax as “betting and gambling”. In the absence of such finding, decades of jurisprudential reflection would firmly institute skill-based online gaming activities as a game of skill even if played with monetary stakes, thus excluding it from the scope of betting and gambling and thus vindicating the stand of the online gaming industry. One needs to give full play to the fact that the legislature choose to leave the expression “betting and gambling” undefined under GST, which seems to confirm the Karnataka High Court finding that the commonly understood meaning of “betting and gambling” should apply. This interpretative approach is described as conferring “legal sense of words” wherein “when words acquire a technical meaning because of their consistent use by the legislature in a particular sense or because of their authoritative construction by superior courts, they are understood in that sense when used in a similar context is subsequent legislation”.34 There exist many precedents confirming this interpretative approach, the decision relating to exposition on meaning of “sale”,35 being the most cited one to vindicate judicial confirmation of the approach to delineate the meaning of undefined expressions. Thus, the arguments appear to have merit that the expression “betting and gambling”, which was not defined in the GST laws should be given the same meaning (as implying games of chance) in view of the judicial exposition36 of the expression.
(c) Assumption that all online games are games of chance? Manifest arbitrariness?.— Let us assume for a moment that the Government is right on its premise that there are certain online activities which are presented as online games but are only an online version of betting and gambling activities. On such an assumed premise perhaps, it appears that the Government is right in extending the GST consequences applicable for offline gambling to online gambling. However, is it indeed the approach adopted by the Government? The answer is in the negative. Instead, all online games, irrespective of the level of skill involved are treated at par and given the same colour and consequences as applicable to gambling and betting activity. For illustration, an online multiplayer car racing gaming with monetary stakes involved, for winning which one needs incredible online skills, is nonetheless treated as betting and gambling for GST purposes. Thus, the omnibus classification of all online games, without distinction, under the overarching umbrella of betting and gambling activity, appears to come under the scanner of the doctrine of “manifest arbitrariness”, which is a fairly recent judicially evolved doctrine to quash substantive legislations as constitutionally invalid.37 The pre-2023 statutory scheme does not appear to segregate online games on basis of games of skill versus games of chance and instead treats all online games as games of chance, thereby triggering examination of this manifest arbitrariness doctrine.
(d) 2023 Amendment positioning online gaming with gambling activities: Inequality writ large?.— Article 1438 of the Constitution of India unequivocally mandates that the State must ensure “equality before law”. In the context of fiscal laws, it is indeed a case “that laws relating to economic activities should be viewed with greater latitude” and “legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula”.39 Having said that, it has also come to be judicially recognised that even in the space of taxation laws, the overarching tenet of Article 14 does not permit treating equals as unequals and vice versa.40 Thus, classifying online gaming under the umbrella of “specified actionable claim” which only covers pernicious and socially undesirable activity relating to betting and gambling, appears to be an unreasonable treatment meted to online gaming. It must also be appreciated that online gaming activity is distinct from lottery (i.e. a purely betting and gambling activity with no linkage with games of skill unlike online gaming) in respect of which the decision in Skill Lotto case41 was rendered, which is sought to be relied upon by the GST authorities. Thus, taxation of online skill-based gaming under GST as betting and gambling activity is clearly going to engage the Supreme Court on the contours of Article 14 and test the limits of flexibility available to lawmakers in space of fiscal legislation.
(e) Goods versus services Muddling tax law and policy?. — A curious legal conundrum has also arisen because of the 2023 Amendments. The intrinsic nature and the manner of its supply essential institute online gaming as a “service”, unlike the case of “goods” which essentially involves supply of movable property.42 In fact, prior to the 2023 Amendment, online gaming was collated under the larger scope of online services.43 The 2023 Amendment, however, positions online money gaming as “specified actionable claim” and thus changes the classification of such online games from services to goods.44 This is not a minor change and carries multiple ramifications because of the scheme of GST legislations. First, there are different statutory prescriptions for supply of goods versus supply of services. Second, supply of goods essentially presupposes transfer of property in identified goods from the owner/supplier to the buyer/recipient. One cannot but agree that the nebulous technological traits of online gaming virtually make it perceptively difficult, if not impossible, to identify who owns these specified goods, who transfers them, who receives them, etc. The legislature has sought to make the task easy by introducing a deeming fiction that identifies online gaming platforms as the supplier of specified actionable claims.45 However, this legislative scheme is not at the cost of conceptual incongruities and challenges in the scheme of GST. At times when the world is moving towards certainty and clarity in tax law,46 one wonders whether it is the right way of legislating tax law and policy, by making it more complex and intertwining it with deeming fictions, which have their own jurisprudential precepts and lead to further litigation.
(f) Correctness of face value of bet as taxable value. — An essential facet of GST is a tax on consumption, being positioned as a destination-based consumption tax.47 Hence, the tax should be commensurate to the consumption. In any given case, as Section 15(1) of the CGST Act also propagates, in a free-market economy the consumption of services is measured by the amount received by the supplier from an unrelated recipient. Thus, for example, the amount passed on by the supplier on behalf of the recipient to a third person is not included in determining the taxable value; which aspect is instituted in the GST regime as well under the concept of “pure agent”48. To appreciate this aspect better, the illustration of banking services is appropriate. In a banking transition where a bank remits INR 10 lakhs (in foreign currency) on behalf of A to B, the bank may charge banking expenses/commission for the remittance, say INR 1000. In this illustration, what should be the taxable base for the GST for the services provided by the bank; INR 1000 or INR 10,01,000. Clearly, the second situation is absurd as the GST being a value added tax can only be on the value of the services provided by the Bank, which is INR 1000. For the same reason, in the case of online gaming, the consumption of services provided by the online gaming platform should be measured by the consideration received by the online gaming platform for providing its services. Hence, amount received by the platform as a Custodian (which is obviously in a contractual and fiduciary capacity) to be passed on to the winner of the game, cannot be considered consideration for supply by the platform. Similarly, amount refunded to the player cannot be consideration received by the platform. Taxing such amounts appears to cast an unreasonable burden of this species of service providers. In fact, this valuation scheme appears to violate Article 14 particularly because arbitrarily fixed rate of tax has consistently been held to be contrary to this constitutionally guaranteed fundamental right, its application being unconditionally extended to test validity of fiscal laws as well.49 Across the decades these decisions have translated into a settled legal proposition that measure of tax must have a reasonable basis with the tax.50 Thus, the validity of Rule 31-A(3) providing for an unrelated basis for levy of tax on online gaming activity appears to be subject to judicial scrutiny.
Indeed, these are only some of the aspects the judicial challenge is likely to witness. The ingenuity of lawyers knows no bounds; hence, multitudes of other legal grounds cannot be ruled out. The contest is clearly going to shed intriguing insights for lawyers and law students alike, with much larger ramifications for the online gaming stakeholders.
A case against retrospectivity: A larger question
Besides the legal angle, there is a much larger objection against retrospective application of the amendments introduced in the GST laws for the pre-2023 period. In order to appreciate this aspect, a digression is warranted.
A former dean of Harvad Law School — Roscoe Pound is credited with introducing a new stream of legal thought i.e. sociological jurisprudence, which stresses upon the importance of social relationships in the development of law and vice versa. The emphasis is upon “social engineering” i.e. attempting to solve problems in society using law as a tool. Various contemporary enactments which seek to “regulate”, “prohibit” or “develop” distinct aspects of social interactions are examples of such legislative attempts to modulate social behaviour. Trouble brews, however, when the subject sought to be regulated is intrinsically intertwined with the daily lives of a larger cross-section of society. Recreational activities, for instance, are essential not just from a human development perspective but also for the very sustenance of the society.
Simultaneously, significant innovation trends and rapid expansion are the hallmarks of a sunrise industry, which have always remained key priorities for the Governments as they propel economic growth. Therefore, the emergence of online gaming as the sunrise industry in India is unsurprising in the wake of world’s largest youth population with deep proliferation of internet connectivity. Laws and regulations are only beginning to catch up with this niche industry, which is fair given that law generally follows the societal changes.
In parallel, the thrust of the incumbent Government has been to promote entrepreneurship. There is an overwhelming trend in the recent decades to encourage the citizens, particularly the youth, to follow their imagination and innovate. However, instead of promoting this emerging industry, an acute tax policy is sought to be given retrospective effect, which has cast ominous clouds over the very survival of this industry. In other words, the tax stance is not aligned with the Government’s avowed industrial policy, an aspect which requires evaluation at a much higher level from multiple macroeconomic variables, such as employment-generation potential, technological innovation, etc. in order to calibrate the fissures in tax policy seemingly at odds with the national growth aspirations.
In fact, upon the recommendation of the GST Council, the law was amended and a special computation mechanism for online money gaming came to be notified from October 2023. Nonetheless, the effect of the GST authorities’ argument amounts to enforcing this new mechanism effectively from July 2017 i.e. since the introduction of GST, a position which does not appear to be logical or reasonable and, therefore, is opposed by the online gaming industry. While the Supreme Court is seized of the issue, the policymakers may nonetheless review the correctness of this approach of retrospective amendment of amended provisions.
Epilogue
The Karnataka High Court had addressed the controversy, albeit relating to the pre-amendment GST position, in May 2023. The Supreme Court had stayed the High Court decision in October 2023. Since then, lot of water has flown; the Government has sought to enforce the provisions of the amendment, and the tax officers have seemingly precipitated matters by proceeding with adjudication in various instances. This is besides the fact that the tax demands have drastically swelled. In brief, the pendency of the dispute has created externalities which has not just created anxiety amongst the industry players but also cast ominous clouds on the very survival of this sunrise sector. The interim stalemate on account of the pendency of the issue for almost two years has resulted into uncertainty, which in itself has been excruciating and inconducive for business. One would hope the finality is soon in sight. The decision of the Supreme Court is not just likely to be make or break for the industry but is also expected to be a defining moment on the future of GST.
*Advocate, Supreme Court of India; LLM, London School of Economics; BBA, LLB (Hons.) (Double Gold Medalist), National Law University, Jodhpur. Author can be reached at: mailtotarunjain@gmail.com.
1. GST Intelligence Directorate v. Gameskraft Technologies (P) Ltd., vide order dated 8-4-2025 in SLP (C) No. 19366/2023, the Supreme Court has inter alia directed that the “batch of matters (shall) come up for final hearing on 5-5-2025. We shall start with the hearing of these matters from the second session onwards and shall conclude it in any circumstances by 9-5-2025.” available at: <https://api.sci.gov.in/supremecourt/2023/30797/30797_2023_11_1_60770_Order_08-Apr-2025.pdf>.
2. Constitution of India, Art. 366(12-A).
3. Union of India v. Mohit Minerals (P) Ltd., (2022) 10 SCC 700, 796-808. The decision inter alia observes as under:
110. … While analysing the respondents’ contention, it is important to contextualise the purpose of GST and the constitutional amendment to effect it. In modern commerce, the distinction between goods and services is increasingly becoming a matter of degree than substance. GST seeks to focus on the taxation of “supply” of goods or services. The provisions of the integrated goods and services tax (IGST) and the CGST Act focus on implementing a workable machinery to adequately capture the complexities of supply in a global and digital age.
* * *
141. GST laws mark a departure from the previous policy of taxing sale/consignments and focuses on the taxing of supplies. The concept of a supply-centric and destination-based tax runs through the scheme of the statutory provisions and the proposals issued by the GST Council. Thus, an amendment to the Constitution was introduced in the form of Article 366(12-A) to create a tax on the supply of goods, or services, or both. In the commercial reality of the times, the conceptual lines between goods and services wear thin. Hence, the focus is on the taxation of supply, as opposed to the creation of neat compartments between goods and services. Section 7(1)(c) of the CGST Act specifically characterises import of services for a consideration to constitute “supply”.…
4. Central Goods and Services Tax Act, 2017.
5. Central Goods and Services Tax Act, 2017, S. 9, It inter alia states that “there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both”.
6. Central Goods and Services Tax Act, 2017, S. 7.
7. Central Goods and Services Tax Act, 2017, Sch. 3.
8. Central Goods and Services Tax Act, 2017, S. 7(2)(a).
9. Central Goods and Services Tax Act, 2017, S. 7(2) states “Notwithstanding anything contained in sub-section (1)” where this sub-section (1) sets out the scope of supply.
10. The Supreme Court in Union of India v. G.M. Kokil, 1984 Supp SCC 196, 202-203 explained that:
11. … a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions.
See further, Alok Aradhe (ed.), G.P. Singh, Principles of Statutory Interpretation (LexisNexis Butterworths, 15th Edn., New Delhi, 2021) p. 284, which states that this “is equivalent to saying that in spite of the provision or Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment”.
11. Central Goods and Services Tax Act, 2017, Entry 6, Sch. 3.
12. Central Goods and Services Tax Act, 2017, S. 2(1) states that: “‘actionable claim’ shall have the same meaning as assigned to it in Section 3 of the Transfer of Property Act, 1882”. In turn, Section 3 of the Transfer of Property Act, 1882 states that:
3. Interpretation clause.— “actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
13. See generally, K.R. Lakshmanan v. State of T.N., (1996) 2 SCC 226, exemplifying the test down in R.M.D. Chamarbaugwalla v. Union of India, 1957 SCC OnLine SC 11.
14. Gameskraft Technologies (P) Ltd. v. GST Intelligence Directorate, 2023 SCC OnLine Kar 18.
15. Finance Act, 1994, S. 65-B(15) provided as under:
65-B. Interpretations.— (15) “betting or gambling’ means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring.
16. Alok Aradhe (ed.), G.P. Singh, Principles of Statutory Interpretation (LexisNexis Butterworths, 15th Edn., New Delhi, 2021) p. 237. In addition, the following extract from the said treatise also buttresses the same understanding:
“If an Act of Parliament uses the same language which was used in a former Act of Parliament referring to the same subject, and passed with the same purpose, and for the same object, the safe and well-known rule of construction is to assume that the legislature when using well-known words upon which there have been well known decisions uses those words in the sense which the decisions have attached to them.”
18. GST Intelligence Directorate v. Gameskraft Technologies (P) Ltd., 2023 SCC OnLine SC 1254.
19. Central Goods and Services Tax Act, 2017, S. 15(1).
20. Gurdeep Singh Sachar v. Union of India, 2019 SCC OnLine Bom 13059. Noted in Ravindra Singh Chaudhary v. Union of India, 2020 SCC OnLine Raj 2688. It is, however, noteworthy that the decision of the Bombay High Court has since been stayed by the Supreme Court vide order dated 6-3-2020 in SLP (Crl) No. 2213/2020 in the appeal filed by the State of Maharashtra against the High Court decision.
21. Such as Delta Corpn. Ltd. v. Union of India, 2023 SCC OnLine Sikk 119, Delta Corpn. Ltd. v. Union of India, 2023 SCC OnLine Bom 2639, Nxgn Sports Interactive (P) Ltd. v. Union of India, 2023 SCC OnLine Guj 4463, Playerzpot Media (P) Ltd. v. Union of India, 2023 SCC OnLine Bom 2627, Myteam11 Fantasy Sports (P) Ltd. v. Union of India, 2023 SCC OnLine Raj 5544, etc.
22. Constitution of India, Art. 32.
23. Alok Aradhe (ed.), G.P. Singh, Principles of Statutory Interpretation (LexisNexis Butterworths, 15th Edn., New Delhi, 2021) pp. 408-409.
24. For a detailed discussion of these amendments, see, Tarun Jain, Online Money Gaming under GST: The “Goods” Conundrum!, 2023 SCC OnLine Blog Exp 76.
25. Defined in the Central Goods and Services Tax Act, 2017, S. 2(80-B) to mean:
2. Definitions.— (80-B) online gaming in which players pay or deposit money or money’s worth, including virtual digital assets, in the expectation of winning money or money’s worth, including virtual digital assets, in any event including game, scheme, competition or any other activity or process, whether or not its outcome or performance is based on skill, chance or both and whether the same is permissible or otherwise under any other law for the time being in force.
26. Integrated Goods and Services Tax Act, 2017, S. 14-A. It enacts “special provision for specified actionable claims supplied by a person located outside taxable territory”.
27. Central Goods and Services Tax Act, 2017, Entry 6, Sch. 3.
28. Central Goods and Services Tax Act, 2017, S. 2(102-A) defines “specified actionable claim”.
29. See generally, State of Bombay v. R.M.D. Chamarbaugwala, 1957 SCC OnLine SC 12, which inter alia observes that:
37. From ancient times seers and law givers of India looked upon gambling as a sinful and pernicious vice and deprecated its practice, and
42. The fact that regulatory provisions have been enacted to control gambling by issuing licences and by imposing taxes does not in any way alter the nature of gambling which is inherently vicious and pernicious.
30. Central Goods and Services Tax Act, 2017, S. 2(105) proviso.
31. It is now settled that law declared by a larger Bench of Supreme Court is binding on smaller Benches. See generally, Central Board of Dawoodi Bohra Community v. State of Maharashtra, (2005) 2 SCC 673 (5 Judges).
32. CIT v. Vatika Township (P) Ltd., (2015) 1 SCC 1 (5 Judges).
33. Union of India v. Martin Lottery Agencies Ltd., (2009) 12 SCC 209.
34. Alok Aradhe (ed.), G.P. Singh, Principles of Statutory Interpretation (LexisNexis Butterworths, 15th Edn., New Delhi, 2021) p. 87.
35. State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., 1958 SCC OnLine SC 100 (5 Judges).
36. For illustration, the Supreme Court recently in its decision in State of Karnataka v. State of Meghalaya, (2023) 4 SCC 416, relevant at paras 113-147, has addressed the scope of this expression “betting and gambling” in the context of constitutional scheme relating to lottery. has accorded similar meaning to the expression betting and gambling, discussing virtually all available precedents on the subject.
37. For illustration, see, Shayara Bano v. Union of India, (2017) 9 SCC 1 (5 Judges) which declares practice of triple talak as manifestly arbitrary, Joseph Shine v. Union of India, (2019) 3 SCC 39 which annuls the Penal Code, 1860, S. 497 (punishing adultery) as manifestly arbitrary, Hindustan Construction Co. Ltd. v. Union of India, (2020) 17 SCC 324 which quashes the Arbitration and Conciliation Act, 1996, S. 87 as being manifestly arbitrary because the Parliament ignored an earlier Supreme Court decision, etc.
38. Constitution of India, Art. 14.
39. R.K. Garg v. Union of India, (1981) 4 SCC 675, citing Holmes J.
40. For illustration, see, Union of India v. N.S. Rathnam, (2015) 10 SCC 681; Shree Bhagwati Steel Rolling Mills v. CCE, (2016) 3 SCC 643; CIT v. Pepsi Foods Ltd., (2021) 7 SCC 413. It is noteworthy that recently the Supreme Court in Assn. of Old Settlers of Sikkim v. Union of India, (2023) 5 SCC 783 has quashed the proviso to the Income-tax Act, 1961, S. 10(26-AAA) which gives exemption to certain category of residents of Sikkim but denies exemption to others and also denies exemption to Sikkim women marrying outside the State.
42. Central Goods and Services Tax Act, 2017, S. 2(52) defines “goods” to mean “every kind of movable property.…” See further, Bharti Airtel Ltd. v. CCE, 2024 SCC OnLine SC 3374.
43. Integrated Goods and Services Tax Act, 2017, S. 2(17), prior to its 2023 Amendment.
44. For a detailed discussion, see, Tarun Jain, Online Money Gaming under GST: The “Goods” Conundrum!, 2023 SCC OnLine Blog Exp 76.
45. Proviso to the Central Goods and Services Tax Act, 2017, S. 2(105).
46. For illustration, the Government of India has recently unveiled the Income-Tax Bill, 2025 inter alia to make the income tax law “concise, lucid, easy to read and understand”.
47. Union of India v. VKC Footsteps India (P) Ltd., (2022) 2 SCC 603.
48. It is noteworthy that the GST legislations recognise the concept of “pure agent” to provide that “expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply”. See, Central Goods and Services Tax Rules, 2017, R. 33.
49. Kunnathat Thatehunni Moopil Nair v. State of Kerala, 1960 SCC OnLine SC 7 (5 Judges), per Sinha C.J.
50. For illustration, see, Lokmanya Mills Barsi Ltd. v. Barsi Borough Municipality, 1961 SCC OnLine SC 287 to the effect that tax on annual letting value cannot be on basis of area of factory but only on basis of land available for letting. As another illustration, see, State of Rajasthan v. Rajasthan Chemists Assn., (2006) 6 SCC 773 quashing levy of sales tax on sale by wholesalers on basis of maximum retail prices (MRP). In fact, recently the Gujarat High Court in Munjaal Manishbhai Bhatt v. Union of India, 2022 SCC OnLine Guj 2593 declared that GST notification which provide for a mandatory fixed rate of deduction of ⅓rd of total consideration towards the value of land is ultra vires the provisions as well as the scheme of the GST Acts. Application of such mandatory uniform rate of deduction is discriminatory, arbitrary and violative of Article 14 of the Constitution of India.
