The Indian government has argued in the Supreme Court that cash bets on games of skill — such as rami, chess and bridge — should be considered a form of gambling and taxed accordingly.

The crucial hearing, which began on May 5, will determine whether placing money on such games transforms them into games of chance, which could bring them under the Goods and Services Tax (GST) regime.

The government asserts that bets or wagers on any game — whether it involves skill or pure chance — are considered gambling and should be taxed. However, online gaming companies strongly disagree.

According to The Hindu, senior advocate A.M. Singhvi, representing one of the companies, argued that the essence of a game does not change just because money is involved. He pointed out that Indian courts have consistently held that skill-based games are distinct from games of chance.

“Is the government saying that in chess, the moment I put money on it, the game metamorphoses from a game of skill into a game of chance? The character of a game cannot be so changed,” Singhvi told the court.

High Stakes

This high-risk legal battle could lead to significant financial consequences.

In January, the Supreme Court put a hold on tax notices worth over ₹1.12 lakh crore (approximately $13.5 billion) that had been issued to about 50 online gaming companies under GST proceedings.

At the heart of the dispute is the question of how the 28% tax should be applied.

The government argues that the tax should be levied on the entire contest entry amount, including the prize pool.

Gaming companies, on the other hand, say GST should only apply to the platform fees or commissions they charge for using the platform.

In 2023, the GST Council recommended a flat 28% tax on online gaming, casinos, and horse racing, without distinguishing between skill-based games and games of chance.

Previously, operators were taxed 18% on the commissions they received from customers.

The hearings are expected to continue until May 9, with a decision likely to be made shortly after.

Source