The legal battle over the Supreme Court's landmark online gaming rulings has widened significantly with Flutter-owned Junglee Games, Sachiko Gaming (which operates PokerStars India), and Play Games24x7 now joining the review challenge alongside Head Digital Works, Junglee Games, and Play Games24x7. According to Business Standard, gaming companies have filed review petitions in the Supreme Court against the May 27 judgment that upheld the constitutional validity of the 28% Goods and Services Tax (GST) on the sector and sustained retrospective tax demands exceeding ₹1.5 lakh crore. These companies have filed review petitions with the Supreme Court, challenging its recent rulings on online gaming and GST taxation. The substantial section of India's organised online gaming industry has now formally challenged the judgments before the Supreme Court, representing a coordinated legal strategy to revisit what many in the industry describe as the most consequential judicial pronouncements governing online gaming and its taxation.
Online gaming companies have moved the Supreme Court seeking review of its 27 May judgment upholding the constitutional validity of the 28% goods and services tax (GST) levy on online gaming. According to information available on the Supreme Court website and reviewed by Mint, review petitions were filed on Tuesday by Play Games24x7, Junglee Games and Sachiko Gaming Pvt. Ltd.. The petitions have been filed through law firm Lakshmikumaran & Sridharan, urging the apex court to reconsider its ruling. A review petition is a limited legal remedy through which the Supreme Court is asked to reconsider its own judgment on grounds such as an apparent error on the face of the record or the discovery of important new evidence. As per NDTV Profit, the review petitions argue that the Supreme Court ought to have referred the matter to a larger Constitution Bench, given the significant legal questions involved. The petitions have asked the court to revisit its decision, contending that the ruling warrants reconsideration on both constitutional and legal grounds, particularly in relation to the GST framework and the retrospective tax claims.
The Supreme Court's 27 May judgment delivered by a bench of Justices J.B. Pardiwala and R. Mahadevan was a major setback for the online gaming industry. The ruling upheld the constitutional validity of the 28% GST levy and validated retrospective tax demands issued by the Directorate General of GST Intelligence (DGGI), estimated at over ₹1.5 lakh crore. The court held that online gaming, fantasy sports and other real-money games involving pooled stakes constitute taxable actionable claims arising from betting and gambling under the GST law. It also ruled that online gaming operators are not merely intermediaries facilitating transactions between users but are suppliers of actionable claims. The ruling also rejected challenges to retrospective tax demands exceeding ₹1.5 lakh crore, representing a major blow to the online gaming industry. As per Business Standard, the May verdict was a major setback for the industry, with the Supreme Court holding that online gaming activities, including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of the GST framework. The court further observed that the levy of GST on the supply of actionable claims arising from betting and gambling is constitutionally valid and does not transgress Articles 366(12) and 366(12A) of the Constitution.
The dispute began after the DGGI issued GST notices totalling over ₹1.5 lakh crore to several online gaming companies, alleging they had paid GST only on platform commissions rather than on the total value of deposits and bets placed by users. Gaming companies, including Games24x7, Head Digital Works, Baazi Networks and the E-Gaming Federation, challenged the notices before various High Courts before the matters were transferred to the Supreme Court. According to NDTV Profit, the review petitions contend that the court erroneously permitted the levy of GST on the creation of actionable claims, instead of limiting the tax to the transfer of winnings. The petitions argue that GST should apply only when winnings are transferred to players and not merely upon payment of the entry amount to participate in a game. The companies have also alleged that the Supreme Court misinterpreted the 'sunrise clause' introduced through amendments to the GST law, resulting in the provisions being applied retrospectively. The ruling has significant financial implications for the industry, with legal experts warning that the tax demands exceed the cumulative revenues of several gaming companies, raising concerns that recovery proceedings could push financially stressed firms towards insolvency unless they receive some form of relief.
The companies have filed review petitions questioning the correctness of the judgments, arguing that the issues involved required consideration by a larger Constitution Bench as they depart from decades of settled jurisprudence distinguishing games of skill from gambling. According to industry executives tracking the litigation, the review petitions essentially argue that the judgments have unsettled more than six decades of gaming jurisprudence without referring the issue to a larger Bench. The petitions contend that the Supreme Court ought to have referred the matters to a larger Bench instead of deciding them through a two-judge Bench, as the judgments effectively reinterpret constitutional principles laid down in earlier Constitution Bench decisions, including the R.M.D. Chamarbaugwala rulings. The companies have also questioned the interpretation adopted in the Gameskraft judgment concerning the levy of Goods and Services Tax (GST). One of the principal grounds raised relates to the Supreme Court's interpretation of 'supply' under the Central GST Act, arguing that the judgment incorrectly equated the creation of an actionable claim with the transfer of an actionable claim, despite the CGST Act specifically recognising only the transfer of actionable claims under the definition of supply. Another key ground raised in the review petitions is that the judgment creates an inconsistent treatment between online and offline gaming, despite both involving similar underlying activities. Gaming companies had challenged the retrospective application of the 28% GST, contending that the Centre's interpretation of "gambling" under the tax framework ran contrary to decades of judicial precedents laid down by the Supreme Court and various high courts.
With the expanded review petitions now filed, the companies are making one last attempt to request the Supreme Court to revisit its ruling. The Supreme Court is yet to decide whether the review petitions warrant admission and further hearing. If the review petitions are dismissed, the 27 May judgment will remain binding. Unlike an appeal, a review petition cannot be used to reargue the entire case and is usually decided by the same bench in chambers, though if the court finds merit in the plea, it may decide to hear the matter in open court. The outcome of these petitions could have major implications for India's online gaming industry, which has argued that the tax burden and retrospective claims threaten business viability in the sector. The review proceedings are expected to be closely watched by the online gaming industry, as they could determine whether the apex court reconsiders the scope and applicability of one of the country's biggest indirect tax disputes. The outcome of the review proceedings could have significant consequences for the sector, which has consistently argued that the tax regime and retrospective demands impose an unsustainable financial burden and threaten the viability of several gaming businesses.
