A bench, led by Chief Justice of India Dhananjaya Y Chandrachud, issued notice to the Union government and the director general of the GST Intelligence, observing that the case required a consideration by the top court.

The bench, which also comprised justices JB Pardiwala and Manoj Misra, further noted that an authoritative decision was called for in the matter since different high courts were in cession of the same issue and it was likely that contradictory judgments could be delivered.

“We will issue notice and examine it here instead of different high courts adopting different views,” the court told senior advocate Harish Salve, who appeared for the petitioner, E-Gaming Federation and Head Digital Works Pvt Ltd, and additional solicitor general (ASG) N Venkataraman, who represented the Centre.

While the ASG concurred with the court’s views, he pointed out that the July 2023 decision of the GST Council to impose 28% GST on the full value of the bets placed, and not on the gross gaming revenue, was taken on a trial basis.

Salve, on his part, argued that the government’s decision tends to include online gaming under actionable claim, which is defined as goods under the Central Goods and Services Tax Act, 2017. To be sure, an actionable claim is a claim to an unsecured debt or a claim to any beneficial interest in movable property that is not in the possession of the claimant. Earlier, lottery, betting, and gambling were classified as actionable claims, but the GST Council’s decision added horse racing and online gaming to the list.

“If one assumes there is an actionable claim, who is supplying it to whom? Where is the supply of actionable claims? What they are seeking to tax is 100% of the face value of the bet,” said the senior counsel.

Salve added that legislative competence issues and where actionable claims could be regarded as goods would arise as primary questions before the court.

Responding, the ASG said that he would be filing a detailed counter affidavit to the petition to satisfactorily answer all the points of law raised. Venkataraman further complained that some of the online companies were interpolating in the media that different ministries and departments in the Centre were not on the same page regarding the regulation. “We had a meeting a few days ago and I can tell you all the ministries and departments are on the same page,” he emphasised.

The case is likely to be heard after four weeks.

The GST Council, in August 2023, amended the law to clarify that all online games involving bets, irrespective of skill or chance, will attract a GST rate of 28% on the full value of the bets placed, and not on the gross gaming revenue. Previously, most gaming companies were paying a tax of 18% applicable on the platform fees, distinguishing based on the factor of these activities being games of skill such as fantasy gaming platforms.

Following the council’s decision, online gaming companies were served with huge tax demands. Online gaming companies were served show-cause notices for alleged tax evasions to the tune of ₹1 lakh crore in 2023.

In September 2023, the Supreme Court had stayed a Karnataka high court judgement quashing GamesKraft’s ₹21,000 crore GST notice on the Centre’s appeal.

After the decision, Union finance minister Nirmala Sitharaman, who heads the GST Council, said that the intent was not to end any industry but a “moral question” about taxing both gaming at the same rate as other “essential items”.

“Our agenda is not to end any industry… all types of businesses have to function… there was discussion on the moral question that on one front, you do not want to end an industry. But that does not mean that you give more incentives to them than essential goods… all states participated in this decision which has been pending for the last 2-3 years. We could take the decision because every state clearly participated in it,” Sitharaman said in July last year.