The Supreme Court has upheld the levy of Goods and Services Tax on online gaming activities as constitutionally valid, and rejected the constitutional and statutory challenge mounted against the levy of CGST on actionable claims arising from betting and gambling transactions.
A bench comprising Justice JB Pardiwala and Justice R Mahadevan held that organised online gaming activities, including fantasy games involving pooled stakes and contingent price structures, give rise to actionable claims and supplies exigible to GST under the statutory framework governing betting and gambling transactions.
Online gaming amounts to betting and gambling .The Court held that even skill-based games acquire the character of betting and gambling for GST once money is staked on uncertain outcomes. The essential element of betting lies in staking money on uncertain outcomes. The character of betting and gambling does not exclusively depend upon whether the underlying activity is a "game of skill" or a "game of chance", but upon the existence of stakes placed upon future uncertain contingencies.
Consequently, even where the underlying activities involve substantial elements of skill, once participation is contingent upon staking money or money's worth on uncertain outcomes, the resultant transaction acquires the character of betting and gambling within the framework of GST framework, the Court ruled.
Therefore, it was held : "Online gaming activities, including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of GST framework." Since actionable claims arising from betting and gambling are subject to GST, online gaming activities will also attract GST.
The Court held that the levy is upon the taxable supply of actionable claims and not on the activity of betting and gambling. "The levy of GST of the supply of actionable claims arising from betting and gambling is constitutionally valid and does not transgress Articles 366(12) and 366(12A) of the Constitution," Justice Mahadevan pronounced, upholding the levy as a valid legislative measure.
The Court observed that mere commercial hardship, reduction in profitability or increase of tax incidence cannot by themselves render a fiscal measure unconstitutional. The levy is supported by statutory authority traceable to Section 7, 9 and 15 of the CGST Act, and satisfied Article 265 of the Constitution, the Court noted. The concept of supply under S.7 of CGST is not confined to mere transfer of pre-existing actionable claims but extends to other forms of supply under the statutory framework, including organised betting and gambling arrangements.
Gaming operators not intermediaries; suppliers Organised gaming and betting platforms create a commercial ecosystem within which participants acquire a contingent beneficial interest in moveable property involving uncertain future outcomes.
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