MUMBAI/NEW DELHI: The Supreme Court's online gaming GST judgment also resolves a years-old battle over casino taxation, rejecting the industry's preferred method of calculating goods and services tax and potentially increasing tax liabilities for operators.
While much of the attention has focused on the Court's decision to uphold the 28% GST levy on online money gaming, the ruling also settles a long-running dispute over whether casinos should be taxed on the revenue they retain or on the full value of player stakes.
The judgment by a bench of Justices J.B. Pardiwala and R. Mahadevan could have significant implications for ongoing tax disputes, future liabilities and the financial position of casino operators.
Mint explains what the ruling means for the industry.
What did the Supreme Court rule?
Casino operators argued that they retain only a small portion of the money wagered by players and that GST should therefore be imposed only on their gross gaming revenue (GGR), or the net amount retained after paying winnings. The Supreme Court rejected this contention.
The Court held that GST is a tax on the supply arising from gambling transactions rather than on casino profits. The taxable event occurs when a player stakes money or chips on an uncertain outcome, regardless of whether the player subsequently wins or loses. The court stated that "GST is a tax on supply and not on profits."
The top court also upheld Rule 31C of the CGST Rules, introduced in October 2023, which provides a specific valuation mechanism for casinos. Under Rule 31C, the value of supply is linked to the total amount paid by players for chips, tokens, coins or tickets used to participate in casino gaming.
Importantly, the judgment held that Rule 31C is clarificatory and retrospective, meaning it does not create a new tax but merely clarifies how existing GST provisions should be applied to casino transactions.
What could be the impact on casino companies?
Legal experts say the ruling significantly strengthens the government's position in ongoing GST disputes by rejecting the GGR model and endorsing Rule 31C as retrospective, removing the industry's principal legal defence against large GST demands.
According to Sudipta Bhattacharjee, partner at Khaitan & Co, the Supreme Court has instead endorsed a broader tax base linked to the money that players bring into the gaming system, which could significantly increase tax liabilities for the period before October 2023.
"That materially increases the tax base in most casino formats for the pre-October 2023 period," Bhattacharjee said.
The court has also clarified that casinos cannot deduct winnings paid to players while calculating GST.
How did the casino dispute reach the Supreme Court?
The dispute emerged after GST authorities issued large tax demands against casino operators, particularly companies within the Delta Corp group, India's largest listed casino operator.
One of the key petitions was filed by Highstreet Cruises Pvt. Ltd, operator of the offshore casino MV Majestic Pride in Goa, which challenged the valuation provisions and GST demands raised by authorities.
Several proceedings were also pending before different high courts. In June 2024, the Sikkim High Court stayed a GST demand of about ₹628 crore against Delta Corp. Over the years, various Delta group entities challenged GST notices aggregating roughly ₹23,000 crore relating to casino and online gaming operations.
Where are casinos operated in India?
India does not have a single national law governing casinos. Betting and gambling fall within the State List, allowing individual states to regulate or prohibit such activities.
While the Public Gambling Act, 1867 broadly prohibits gambling establishments, casino operations are permitted in Goa, Sikkim, and the Union Territory of Dadra and Nagar Haveli and Daman and Diu.
Goa remains India's dominant casino market, with both offshore and onshore operations governed by the Goa, Daman and Diu Public Gambling Act, 1976. Sikkim regulates casinos under the Sikkim Casinos (Control and Tax) Act, 2002.
How large is India's casino market?
According to Credence Research, India's casino tourism market is estimated at $2.14 billion in 2024 and projected to grow to $4.34 billion by 2032, a CAGR of 8.15%.
Goa accounts for roughly 65% of the market, followed by Sikkim at 20% and Daman at 10%.
Major operators include Delta Corp's Deltin casinos, Casino Pride and Big Daddy Casino in Goa, and Casino Deltin Denzong and Casino Mahjong in Sikkim.
Does this increase insolvency risks because of large GST liabilities?
The ruling could increase financial pressure on gaming companies, particularly those facing substantial retrospective tax demands.
Ikesh Nagpal, lead-indirect tax at AKM Global, said the judgment has brought clarity to a long-running dispute but has also raised questions about the commercial sustainability of existing gaming business models under the current GST regime.
He warned that companies may explore financial restructuring, negotiated settlements with authorities or even protection under the Insolvency and Bankruptcy Code if recovery proceedings severely affect cash flows.
Darshan Bora, partner at Economics Law Practice, said, “The ruling undoubtedly increases the tax burden by rejecting the GGR-based model. However, the long-term impact will depend on the incremental liability arising from re-computation and the financial position of individual operators. As such, the consequences are likely to vary on a case-by-case basis rather than resulting in a uniform outcome across the sector.”