Organized Online Gaming and Fantasy Sports Involve Supply of Actionable Claims Constituting Taxable Betting and Gambling.

The case arose from a challenge to show-cause notices (SCNs) issued to online gaming companies (including Gameskraft), fantasy sports platforms (like Dream 11), and casino operators.

Specifically, the Revenue issued an SCN to Gameskraft proposing recovery of ₹21,000 crores, alleging that the company supplied "actionable claims" in the nature of betting, taxable at 28% on the total stake value rather than 18% on the platform fee.

The High Court of Karnataka quashed the SCN, holding that rummy is a game of skill and not "betting and gambling".

Simultaneously, the High Court of Bombay in Gurdeep Singh Sachar held that fantasy sports were games of skill exempt from gambling taxes.

In 2023, the Union Government amended the CGST Act to specifically define "online money gaming" and "specified actionable claims," reclassifying them as taxable goods to provide legislative clarity.

The Supreme Court clubbed these matters to determine the constitutional validity of taxing these activities under the GST regime for both the pre- and post-2023 amendment periods.

The Court applied Article 246A of the Constitution, which provides plenary power to legislate on Goods and Services Tax

Article 366(12), which provides an inclusive definition of "goods".

Section 2(52) of the CGST Act, which defines "goods" to include "actionable claims".

Section 7, which defines "supply" in an expansive sense.

The Court invoked the definition of "actionable claim" from Section 3 of the Transfer of Property Act, 1882.

The Court further relied on the principles from Sunrise Associates v. Govt. of NCT of Delhi [p. 280] and Skill Lotto Solutions Pvt. Ltd. v. Union of India [p. 281], which affirmed that lottery tickets are actionable claims and taxable as goods.

The "preponderance of skill" test from RMDC-I and RMDC-II was contextualized to clarify that staking money on any uncertain outcome, regardless of skill, constitutes betting for fiscal purposes.

The Court reasoned that "betting and gambling" are cognate expressions centered on the act of staking money on an uncertain event; thus, whether the game is skill-based (like rummy/fantasy sports) or chance-based is irrelevant to taxability if stakes are involved.

Under GST, the taxable event is the "supply" of the chance to win, which constitutes an "actionable claim" because the player has a contingent beneficial interest in the prize pool (movable property) not in their possession.

The Court rejected the "entrustment" argument, noting that once a player commits funds to gameplay, they relinquish dominion, transforming the "deposit" into "consideration" for the supply.

Regarding valuation, the Court held that the "measure of tax" (the full bet value) need not be identical to the "nature of tax" (the supply), and finding a reasonable nexus between the two is sufficient.

Rule 31A and the subsequent Rules 31B and 31C were found to be valid machinery provisions traceable to Section 15(4), 15(5), and the general rule-making power under Section 164.

Finally, the 2023 Amendments were held to be clarificatory because they did not create a new levy but merely refined the existing framework to address evolving digital business models.

It held that the 2023 Amendments are clarificatory and retrospective.

The Court quashed the Karnataka High Court judgment, restored the SCNs issued to the gaming companies, and directed that all pending assessments and show-cause notices for all platforms (online gaming and casinos) be decided in accordance with Rules 31B and 31C.

All writ petitions and transferred cases filed by the assessees were dismissed. The Gurdeep Singh Sachar judgment of the Bombay High Court was set aside.

No order as to costs was made.