Gameskraft GST Day 26: Face value of entire bet is consideration and to be taxed, argues ASG
The Supreme Court continued hearing rejoinder submissions in the Gameskraft GST matter on Tuesday, with Additional Solicitor General N. Venkatraman advancing arguments on behalf of the Union of India.
Responding to contentions raised by gaming companies regarding the classification of online gaming services under GST, the ASG argued that Entry 998439 of Notification 11/2017 pertains only to online content or games played without stakes, and therefore cannot include online real money games involving betting or gambling. He added that Entry 999692, which refers to online gambling services, is confined to platforms that act merely as service providers for facilitating gambling, without actually receiving the stake money. According to him, these entries were being misinterpreted and do not override the classification of betting and gambling as “actionable claims,” which are categorised as goods under the CGST Act and relevant rules.
On the question of valuation, Venkatraman relied on Section 2(31) of the CGST Act, which defines “consideration” to include any payment made “in respect of, in response to, or for the inducement of” a supply. He argued that the face value of the entire bet amount qualifies as consideration because the game cannot commence unless the full stake is paid. He further contended that the entire bet amount is the transaction value within the meaning of Section 15(1) of the Act, and that Rule 31A merely clarifies the mechanism for valuation and is not creating a special rule.
The ASG drew support from the Supreme Court’s three-judge bench decision in the Skill Lotto case, which held that the full value of lottery tickets is taxable without allowing deduction for prize money. He asserted that this reasoning would equally apply to online games involving stakes, as the statutory and rule-based mechanism for determining transaction value must be followed without any abatements.
Addressing arguments raised by the gaming companies on the role of the GST Council, the ASG submitted that the council had clearly recommended that tax be levied on 100 percent of the face value of bets for all forms of betting, gambling and horse racing. He referred to the minutes of the 25th GST Council meeting and the agenda papers of the fitment committee to establish that the insertion of Rule 31A was based on such recommendation. According to him, whether Rule 31A is rooted in Section 164, Section 15(4), or Section 15(5) of the CGST Act is immaterial, as all three derive authority from the prior recommendation of the council.
He also rebutted the argument that Rule 31A(3) is manifestly arbitrary or violates Article 14 of the Constitution by treating games of skill and games of chance similarly. He submitted that both types of games involve uncertain outcomes when played for stakes, and therefore fall within the definition of betting and gambling for purposes of taxation.
ASG Venkatraman is expected to continue his rejoinder submissions when the matter resumes. The hearing will continue tomorrow, i.e. 06 August 2025.
