Judging the Game: Supreme Court's Role in Online Gaming Debates
Nilanjan Banik is a professor at Bennett University's School of Business. His work focuses on the application of time series econometrics in issues relating to international trade, market structure and development economics. He is also interested in the "rules" part of WTO; especially examining non-tariff barriers aspects of GATT/WTO agreements. He has project experience with Australian Department of Foreign Affairs and Trade, Australia; Laffer Associates, USA; KPMG, India; Ministry of Commerce, Government of India; Research and Information System for Developing Countries (RIS), New Delhi; Indian Council for Research on International Economic Relations (ICRIER), New Delhi; Center for Economic Policy Research, UK; Asian Development Bank Institute, Tokyo; Asian Development Bank, Manila; South Asia Network of Economic Research Institutes (SANEI); UNESCAP-ARTNeT, Thailand, Australia India Institute, University of Melbourne; and World Trade Organization, Geneva. LESS ... MORE
The skill-based online gaming industry will be watching with bated breath on the Supreme Court's judgement on a host of contentious issues, contested in various High Courts and other fora of the country, which has put the industry's very survival at stake. It's verdict on of Karnataka High Court's decision of 2020 will end decades-old issues plaguing the industry. These include the decision of the goods and service tax (GST) authorities to hike the tax rate from 18% to 28% on the services provided by the online gaming companies, providing clarity on whether online gaming with monetary stakes qualify as a game of skill or a game of chance, and such other issues.
The Karnataka High Court in the Skill Lotto Solutions (P) Ltd versus Union of India 2020, had categorically held that 'there is a distinct difference between 'games of skill' and 'games of chance' and various online games as such were games of skill and thus not the subject of GST. This judgement of the Karnataka High Court is now sought to be challenged by the GST authorities coming up for hearing from May 5 – 9, 2025.
Amendments to the Act
Coupled with that the apex court will also investigate the validity of several amendments made in Central Goods and Services Tax Act (CGST) 2017, which came into effect from October 1, 2023. These include the introduction of new concepts like 'online money gaming', 'specified actionable claims' and the introduction of a new valuation mechanism –-Rule 31 B- which have all adversely impacted the fortunes of this sunrise industry.
It would be patently wrong to associate traditional competitions and tournaments, which offer monetary rewards to the winners such as Wimbledon, or different Chess tournaments, and bracketed with gambling, or other games of chance. Today, different methodologies like skill-chance statistical framework, exist that can used to regulate online gaming and differentiate it from game of chance. These statistical frameworks could be used for regulation either by an independent regulator like the Telecom Regulatory Authority of India (TRAI) or through a self-regulatory body comprising members of online gaming platforms.
There is an urgent need for clarity on whether the 28% tax rate on these companies should be applied retrospectively or prospectively. Thus, the Supreme Court will be deliberating on two sets of issues, pre-and post- October 2023 laws and amendments– The provisions of the CGST Act 2017, and the amendments to the Act in 2023.
The introduction of the concept 'online money gaming' industry as a subset of online gaming has meant the inclusion of all online games that are played in the 'expectation of winning money or money's worth'. It puts all online gaming into one bucket thereby removing the earlier distinction between the game of skill and game of chance in one stroke.
Similarly, by enlisting all online money gaming as a 'specified actionable claim', the October 2023 amendments have positioned these games alongside lottery, betting and gambling, and hence liable for payments of GST. It does not consider the talent, expertise and years of experience that is required to succeed in such games of skill. The earlier distinction between 'actionable claims' not subjected to GST and lottery, gambling and betting, which came under the GST ambit, too, has been done away with. The 2023 amendments to the CGST Act of 2017, also changes the classification of online games from services to goods with all its ramifications.
The New Valuation Provision
Furthermore, the new valuation provision -–Rule 31 B—steeply undercuts the very business model of the online gaming industry by imposing GST on the amount placed on the gaming platform and not on the platform fee. The fair value would have been to levy GST on the money collected by such platforms towards facilitating the gamers. Thus, online gaming platform owners must pay tax on amounts that does not even accrue to them.
Moreover, it goes against Article 14 of the Constitution, which guarantees 'equality before the law' and 'equal protection of the law' to all persons within the territory of India. Arbitrarily fixed rate of law has consistently been held to be contrary to the constitutionally guaranteed fundamental law, which has also been extended to fiscal laws.
Thus. the issue for the online gaming industry is not just about the fairness of the valuation scheme but that it has been applied retrospectively. Such an amendment goes against the statutory interpretation of fiscal legislation that new tax liability cannot be created on a retrospective basis in the absence of specific legislative intent.
The law and its subsequent amendments have created anxieties and uncertainties among the skill-based online gaming platforms and cast ominous cloud on the survival of the industry, forget the broader national goals of innovation, entrepreneurship and employment generation. What is required is either an independent regulator like the Telecom Regulatory Authority of India (TRAI) or a self-regulatory body of online gaming platforms. The decision of the Supreme Court will not only make or break a fledgling industry but will also be a defining moment for the future of GST.
Facebook Twitter Linkedin Email Disclaimer
Views expressed above are the author's own.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hindu
an hour ago
- The Hindu
Cash discovery row: Resignation only option before Justice Varma to avoid removal by Parliament
Resignation is the only option before Justice Yashwant Varma to avoid impeachment by Parliament as the government pushes for bringing a motion to remove the Allahabad High Court judge over alleged corruption. Officials aware of the procedure to appoint and remove Supreme Court and high court judges pointed out that while defending his case before lawmakers in any of the House, Justice Varma can announce that he is quitting and his verbal statement will be considered as his resignation. Should he decide to resign, he will get pension and other benefits entitled to a retired HC judge. But if he is removed by Parliament, he will be deprived of pension and other benefits, they noted. According to Article 217 of the Constitution, a high court judge "may, by writing under his hand addressed to the President, resign his office." A judge's resignation does not require any approval. A simple resignation letter is sufficient. A judge may give a prospective date to step down. In such cases, the judge can withdraw the resignation before the date he or she has mentioned as the last day in office. Removal by Parliament is the other way a judge can vacate office. Then Chief Justice of India Sanjiv Khanna had written to the president and the prime minister to remove Justice Varma, mired in the cash discovery row. Justice Khanna's report was based on the findings of a three-judge in house panel which investigated the case. Justice Khanna had prodded Varma to resign but he had refused, sources had earlier said. A motion could be brought in either of the two Houses of Parliament. In the Rajya Sabha, at least 50 members have to sign the motion. In Lok sabha, 100 members have to support it. According to the Judges (Inquiry) Act of 1968, once a motion to remove a judge is admitted in any of the Houses, the speaker or the chairman, as the case may be, will constitute a three-member committee to investigate the grounds on which the removal (or, in popular term, impeachment) has been sought. The committee consists of the chief justice of India (CJI) or a Supreme Court judge, the chief justice of one of the 25 high courts and a " distinguished jurist". Parliamentary Affairs Minister Kiren Rijiju had last week said the present case is "slightly different" as an in-house committee formed by then CJI Khanna has already submitted its report. "So what is to be done in this matter, we will take a call," he said. The minister said the process has to be followed, but how to "integrate the inquiry already conducted" needs to be decided. "As per the rule, a committee has to be constituted and then the committee has to submit a report and the report will be tabled in the House and discussions will start to impeach. Here, a committee has already been constituted, not by Parliament. But it cannot be brushed aside" as it was constituted by the CJI, he said. Responding to questions that a committee has to be mandatorily formed under the Judges (Inquiry) Act, Rijiju said the speaker will take a decision in this regard. He said reconciling the report of the in-house panel and the one under law is a "secondary matter". The primary objective is to bring the impeachment motion. Monsoon session begins July 21 and ends August 12. A fire incident at Justice Varma's residence in the national capital in March, when he was a judge at the Delhi High Court, had led to the discovery of several burnt sacks of cash at the outhouse. Though the judge claimed ignorance about the cash, the Supreme Court-appointed committee indicted him after speaking to a number of witnesses and recording his statement. The apex court has since transferred him to his parent high court, the Allahabad High Court, where he has not been assigned any judicial work. Supreme Court judge V Ramaswami and Calcutta HC judge Soumitra Sen had earlier faced impeachment proceedings but they resigned. Justice Varma's removal proceedings will be taken up in the upcoming Monsoon session of Parliament. This will be the first ever impeachment proceeding to be taken up in the new Parliament building.
The Print
2 hours ago
- The Print
Infosys gets huge relief on GST as DGGI closes Rs 32,400 cr pre-show cause notice
Mid-last year, the goods and services tax (GST) authorities had slapped Rs 32,403 crore notice on Infosys for services availed by the company from its overseas branches for five years starting 2017. New Delhi, Jun 7 (PTI) In a major relief for Infosys, the Director General of GST Intelligence has closed pre-show cause notice proceedings against the company for financial years 2018-19 to 2021-22 involving a staggering Rs 32,403 crore in GST dues. The GST demand, in fact, exceeds Infosys's annual profits (net profit for full FY25 stood at Rs 26,713 crore), and its closure now is bound to come as a significant relief for the tech major. The Bengaluru-headquartered company, in a BSE filing, said with the receipt of the latest communication from DGGI 'this matter stands closed'. 'In continuation to our earlier communications on July 31, 2024, August 1, 2024 and August 3,2024 on GST, this is to inform that the company has today received a communication from the Director General of GST Intelligence (DGGI) closing the pre-show cause notice proceedings for the financial years 2018-19 to 2021-22,' the company said in the filing late Friday evening. Infosys — which competes with the likes of TCS, Wipro and others for global IT contracts — said it had received and responded to a pre-show cause notice issued by DGGI for the period July 2017 to March 2022 on the issue of non-payment of IGST under Reverse Charge Mechanism. 'The GST amount as per the pre-show cause notice for this period was Rs 32,403 crore. The company had on August 3, 2024 received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017-2018. With the receipt of today's communication from DGGI, this matter stands closed,' Infosys said. In July last year, Infosys had informed that Karnataka State GST authorities issued a pre-show cause notice for payment of GST of Rs 32,403 crores for the period July 2017 to March 2022 towards the expenses incurred by overseas branch offices of Infosys Ltd, and added that the company has responded to the pre-show cause notice. 'The company has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the company is in the process of responding to the same,' the filing of July 2024 had said. All along, Infosys maintained that GST is not applicable on these expenses. 'Additionally, as per a recent circular issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entity are not subject to GST,' Infosys had argued back in July 2024. The tech firm had asserted GST payments are eligible for credit or refund against export of IT services. 'Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter,' the company had contended. The document sent to Infosys by GST authorities at that point had reportedly said, 'In lieu of receipt of supplies from overseas branch offices, the company has paid consideration to the branch offices in the form of overseas branch expense. Hence, M/s Infosys Ltd, Bengaluru is liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of Rs 32,403.46 crores for the period 2017-18 (July 2017 onwards) to 2021-22.' The Directorate General of GST Intelligence in Bengaluru had been of the opinion that Infosys did not pay the Integrated-GST (IGST) on the import of services as a recipient of services. For the just-ended March quarter, Infosys reported an 11.7 per cent decline in consolidated net profit to Rs 7,033 crore mainly on account of compensation to employees, and acquisitions during the reported period. The company has guided for a revenue growth of 0-3 per cent in constant currency terms in the current fiscal year, citing uncertainty in the environment. For the full FY25, profits saw a marginal increase of 1.8 per cent to Rs 26,713 crore; revenues climbed 6.06 per cent to reach Rs 1,62,990 crore — exceeding its guidance of 4.5-5 per cent for the full FY25. PTI MBI TRB This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
&w=3840&q=100)
Business Standard
3 hours ago
- Business Standard
Cash discovery row: Justice Varma must quit to avoid removal by Parliament
Resignation is the only option before Justice Yashwant Varma to avoid impeachment by Parliament as the government pushes for bringing a motion to remove the Allahabad High Court judge over alleged corruption. Officials aware of the procedure to appoint and remove Supreme Court and high court judges pointed out that while defending his case before lawmakers in any of the House, Justice Varma can announce that he is quitting and his verbal statement will be considered as his resignation. Should he decide to resign, he will get pension and other benefits entitled to a retired HC judge. But if he is removed by Parliament, he will be deprived of pension and other benefits, they noted. According to Article 217 of the Constitution, a high court judge "may, by writing under his hand addressed to the President, resign his office." A judge's resignation does not require any approval. A simple resignation letter is sufficient. A judge may give a prospective date to step down. In such cases, the judge can withdraw the resignation before the date he or she has mentioned as the last day in office. Removal by Parliament is the other way a judge can vacate office. Then Chief Justice of India Sanjiv Khanna had written to the president and the prime minister to remove Justice Varma, mired in the cash discovery row. Justice Khanna's report was based on the findings of a three-judge in house panel which investigated the case. Justice Khanna had prodded Varma to resign but he had refused, sources had earlier said. A motion could be brought in either of the two Houses of Parliament. In the Rajya Sabha, at least 50 members have to sign the motion. In Lok sabha, 100 members have to support it. According to the Judges (Inquiry) Act of 1968, once a motion to remove a judge is admitted in any of the Houses, the speaker or the chairman, as the case may be, will constitute a three-member committee to investigate the grounds on which the removal (or, in popular term, impeachment) has been sought. The committee consists of the chief justice of India (CJI) or a Supreme Court judge, the chief justice of one of the 25 high courts and a " distinguished jurist". Parliamentary Affairs Minister Kiren Rijiju had last week said the present case is "slightly different" as an in-house committee formed by then CJI Khanna has already submitted its report. "So what is to be done in this matter, we will take a call," he said. The minister said the process has to be followed, but how to "integrate the inquiry already conducted" needs to be decided. "As per the rule, a committee has to be constituted and then the committee has to submit a report and the report will be tabled in the House and discussions will start to impeach. Here, a committee has already been constituted, not by Parliament. But it cannot be brushed aside" as it was constituted by the CJI, he said. Responding to questions that a committee has to be mandatorily formed under the Judges (Inquiry) Act, Rijiju said the speaker will take a decision in this regard. He said reconciling the report of the in-house panel and the one under law is a "secondary matter". The primary objective is to bring the impeachment motion. Monsoon session begins July 21 and ends August 12. A fire incident at Justice Varma's residence in the national capital in March, when he was a judge at the Delhi High Court, had led to the discovery of several burnt sacks of cash at the outhouse. Though the judge claimed ignorance about the cash, the Supreme Court-appointed committee indicted him after speaking to a number of witnesses and recording his statement. The apex court has since transferred him to his parent high court, the Allahabad High Court, where he has not been assigned any judicial work. Supreme Court judge V Ramaswami and Calcutta HC judge Soumitra Sen had earlier faced impeachment proceedings but they resigned. Justice Varma's removal proceedings will be taken up in the upcoming Monsoon session of Parliament. This will be the first ever impeachment proceeding to be taken up in the new Parliament building. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
