Indian Supreme Court weighs taxation of betting on skill-based games

India’s Supreme Court is examining whether real-money online games traditionally seen as skill-based should be taxed as gambling when money is wagered on outcomes, in a case that could reshape the country’s rapidly growing online gaming industry.

A two-judge bench of Justices J.B. Pardiwala and R. Mahadevan is hearing petitions from gaming companies contesting a government decision to impose a 28% Goods and Services Tax (GST) on the full value of bets placed on platforms offering games like rummy, chess, and fantasy sports.

Representing the federal government, Additional Solicitor General N. Venkataraman argued that once betting is introduced, the nature of a skill-based game transforms into gambling.

“Then it will become gambling, in spite of being a game of skill... Betting on a game of skill is statutorily considered gambling,” Venkataraman told the court. He added, “Not running on the horse, but when you bet on a horse, is it a game of skill or chance?... Betting can never be a game of skill.”

The Centre maintains that the classification of a game—whether skill-based or chance-based—is irrelevant for taxation. The act of wagering, it says, falls within the legal definition of gambling and must be taxed accordingly. Venkataraman noted that even states such as Nagaland, which legally protect skill-based games, treat wagering on such games as gambling.

Opposing the government's stance, senior advocate A.M. Singhvi, representing a group of gaming companies, argued that monetary stakes do not alter a game’s fundamental character.

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

The dispute also touches on whether taxes should apply to the full value of bets or only to gross gaming revenue. The industry had previously been paying 18% GST, treating its offerings as services rather than gambling activities. Authorities have reclassified the activity under gambling, triggering the higher 28% tax rate.

The Centre has also banned over 1,400 gaming sites amid wider efforts to regulate the sector and curb illegal betting.

The court has issued notices to the government and GST Council and is hearing multiple petitions, including from firms such as Dream11, Head Digital Works, and Games24x7.