Summary of this article
Delta Corp shares fell over 16 per cent after SC upheld retrospective 28 per cent GST on online gaming
SC ruled that games involving money stakes qualify as betting and gambling under GST law
The verdict revives massive tax demands and increases pressure on gaming companies
Shares of gaming and hospitality company Delta Corp crashed over 16 per cent on May 29, following a landmark Supreme Court ruling earlier this week that removed the long-standing regulatory ambiguity around India’s real-money gaming sector, but also leaves the industry with a massive financial burden.
Delta Corp's shares opened with a gap down of 16 per cent at Rs 68 per share on the BSE. However, investors quickly jumped in for bargain hunting and, as of 9:40 AM, its shares traded at Rs 71.74, down 11.42 per cent.
Nazara Technologies' shares also slipped as much as 3.63 per cent to an intraday low of Rs 279 apiece.
The Supreme Court, in the case of Directorate General of GST Intelligence vs Gameskraft Technologies, upheld the constitutional validity of the government's 28 per cent Goods and Services Tax (GST) levy on online gaming platforms. Importantly, for the industry and its investors, the court ruled that the tax applies retrospectively. This effectively validates the tax department’s massive back-tax notices issued to operators over past years.
Why the "Skill vs Chance" Defense Failed
The big question was whether real money games are games of skill or games of chance, because that affects how they are taxed.
The Supreme Court discarded that old distinction. It said the legal benchmark is whether users are risking money on uncertain outcomes. If yes, it counts as betting or gambling under GST.
The court also rejected the claim that gaming platforms are just neutral intermediaries. The two-judge bench comprising Justice JB Pardiwala and Justice R Mahadevan found that companies actively facilitate, structure, and control the ecosystem where stakes are placed. Consequently, the money deposited by users cannot be classified as mere escrow funds. It must be treated as "consideration" under the GST framework, rendering the entire pool taxable.
The bench also upheld the ban on online games such as rummy and poker when played for money or stakes. The Court said states have a responsibility to protect public health and maintain social order, especially amid rising concerns around online gaming addiction and financial losses suffered by users.
Legal Dispute Explained
The dispute started after GST authorities claimed that online gaming companies should pay 28 per cent GST on the full amount deposited by players, instead of only on the platform fee or commission earned by the companies.
In September 2023, the Supreme Court stayed a Karnataka High Court order that had cancelled a GST notice issued to Gameskraft. The notice, sent by the Directorate General of GST Intelligence (DGGI), demanded nearly Rs 21,000 crore in taxes from the company over its online gaming platforms such as Rummy Culture, Gamezy and Rummy Time.
The government argued that when users put money into online games, the activity amounts to betting and gambling under GST law, even if the game involves skill. Based on this view, tax authorities said GST should apply to the entire “buy-in” amount paid by players.
Gaming companies disagreed with this interpretation. Firms including Gameskraft, Delta Corp, Head Digital Works and Play Games24x7 argued that they only provide a platform where players compete against each other. According to them, the companies do not take part in the games or own the prize money.
The industry also said games such as rummy, poker and fantasy sports are mainly skill-based and should not be treated the same as gambling activities. They argued that player deposits cannot be classified as “actionable claims” for GST purposes.
Senior advocate Harish Salve, appearing for fantasy gaming firms, told the court that the industry was not against paying 28 per cent GST going forward. However, companies strongly opposed the retrospective tax demand, saying it created huge financial liabilities for the sector.
The tax amounts involved are massive. According to court submissions, online gaming companies alone received GST notices worth nearly Rs 91,685 crore. Including casinos, the total disputed tax demand crossed Rs 1.08 lakh crore.
The Centre had also changed GST rules in August 2023, making it compulsory for foreign online gaming companies to register in India from October 1, 2023.
The case eventually became a larger debate on whether online skill-based gaming should be treated as betting and gambling under India’s GST laws.
