Legal Digest | GST on betting: Why clarity is needed on platform fee taxation
Ever since the government used the sledgehammer of one-size-fits-all GST rate of 28% whether the betting game is of skill or chance, another question has reared its head—if the GST of 28% is on platform fee alone or on the entire betting amount? In the wake of the one-size-fits-all rate of 28%, tax authorities (DGGI) issued over 70 show-cause notices (SCNs) to gaming operators, claiming 28% GST on the total value of stakes (betting amount) rather than just the platform commission.
In this regard the Supreme Court stay on a Karnataka High Court ruling that had quashed a Rs.21,000 crore tax notice against Gameskraft based on the entire betting amount has caused disquiet. But one hopes the Apex Court will not allow the government to put its shovel on the entire amount. To wit, Amazon marketplace gets lets us say 26% commission as platform fee from the merchants who have onboarded its online marketplace. Amazon will be required to pay GST on this alone and not on the entire price received from buyers towards the sale of products.
Case 2: New materials and not change of opinion can trigger reassessment
In PMC Fincorp Ltd vs. Commissioner of Income Tax, the Delhi High Court (2025) quashed reassessment proceedings (notice under Section 148) initiated in 2018, holding them based on a "change of opinion" rather than new material. The Court ruled that re-examining the same alleged accommodation entry already analysed in earlier proceedings constitutes a mere change of opinion, which is invalid.
The court found no fresh incriminating material was uncovered to justify the new proceedings. if no incriminating material is found during a search (u/s 153A), additions regarding "penny stock" or "accommodation entries" cannot be made. Reassessment regime was put in place to arm the income tax department to tax what was not taxed during the original assessment due to the evasionary tactics of the assessee and which the department subsequently discovered maybe from the GST records or from sub-registrars or banks which are required to keep close tab on large transactions.
It is not available for waking up late when with due diligence the assessing officer could have caught the evasion at the stage of original assessment. Over the years, Courts have been reluctant to grant latitude to the department to latch onto the reassessment regime in order to cover up its own ineptitude and more importantly to protect the assessee from harassment.
Case 3: No penalty when the assessee is not at fault for non-deduction of TDS
The Kerala High Court in State Bank of India vs. the Tax Recovery Officer held that when an assessee (specifically a bank) is not treated as an "assessee-in-default" under Section 201(1) of the Income Tax Act because their actions were aligned with a court’s interim stay, the enforcement of outstanding demand for Tax Deducted at Source (TDS) is invalid, leading to the quashing of such orders.
The department places heavy reliance on TDS, as it is one of the most efficient mechanisms for collecting taxes in advance and curbing evasion. A significant portion of TDS is deducted by employers, many of whom maintain full-fledged TDS departments at a cost of crores of rupees—effectively performing a national service without any recompense. However, any failure in compliance can invite stringent consequences, including penalties and even the prospect of imprisonment.
Therefore, the potential deductors are sitting ducks vulnerable to being pulled up by the department. But the Kerala High Court stopped the overreach when the department ignored the stay and went on to pull up the bank for not deducting tax at source when none was warranted.
