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. 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. Traditionally the online gaming industry has been paying GST considering its activity as a service, taxable at 18% GST. Search broadband services near my house and got Hathway in the search. Hathway offers 24/7 customer support for its broadband services in Chennai. The installation of a new Hathway broadband connection in Chennai typically takes 24 working hours, depending on your location and the availability of technicians.

This ruling aligns with earlier decisions by the Sikkim High Court, which had struck down multiple service tax levies on lottery-related activities between 2012 and 2017. Since the lottery business operates on a principal-to-principal basis rather than a principal-agent relationship, it does not constitute a service, making it ineligible for service tax. The central government has long sought to bring lottery-related activities under the service tax net. The ruling effectively nullifies multiple attempts by the Centre to impose a service tax on lottery distribution, reinforcing the constitutional separation of powers. While lottery tickets are categorised as actionable claims, the Supreme Court held that operating a lottery scheme qualifies as betting and gambling. The court ruled that lotteries fall under “betting and gambling” as per Entry 62 of the State List in the Seventh Schedule of the Constitution, placing them under the exclusive domain of state legislatures.

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). 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. 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”.

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(c) Assumption that all online games are games of chance? In any case, it is now firmly settled that a new substantive tax liability is prospective in absence of specific retrospective legislation.33 Thus, the platform is left with INR 10, which represents its consideration for facilitating the kabook in online game. Thus, the gaming platform is in receipt of INR 200.

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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. 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. 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.

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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. 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. 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. 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.