SC stays ₹123 crore GST notice to Baazi Games pending Gameskraft verdict

In a major interim relief to Baazi Games Pvt. Ltd., the Supreme Court has stayed a ₹123 crore GST show-cause notice issued to the online gaming platform over alleged supply of “actionable claims” in the nature of betting.

The stay comes as the apex court prepares to pronounce its judgment in the Gameskraft case, which is expected to settle the long-standing question of how online skill-based games were to be taxed under the Goods and Services Tax (GST) regime till September 2023.

The bench of Justice J.B. Pardiwala and Justice K.V. Vishwanathan observed that since the larger issue on the applicability of GST to online gaming platforms has already been heard and judgment was reserved on August 12, 2025, further proceedings on Baazi Games’ notice "shall remain stayed.”

Constitutional challenge to GST valuation rules

Baazi Games challenged the show-cause notice (SCN) issued by the tax authorities on multiple constitutional and jurisdictional grounds. The company argued that the notice, issued under Rule 31A(3) of the CGST Rules, was legally untenable because the rule itself suffers from gross constitutional infirmities.

According to the company, Rule 31A(3)—which deals with the valuation of betting and gambling transactions—is inconsistent with Section 15(1) and Section 15(5) of the CGST Act that define valuation based on the “transaction value.” Baazi Games further contended that Section 15(5) also violates Article 246A of the Constitution, which governs the powers of Parliament and State legislatures to levy GST, and undermines the uniform valuation mechanism envisioned under the Act.

The company, represented by Senior Advocate Tarun Gulati, and Advocates Sudipta Bhattacharjee, Onkar, Arjyadeep Roy, and Anishka Gupta from Khaitan & Co., submitted that the adjudicating authority’s decision to proceed with the personal hearing was premature and without jurisdiction, given that the Gameskraft judgment would have a direct bearing on the matter.

Industry’s relief and legal clarity awaited

The ₹123 crore GST demand against Baazi Games is part of a wider enforcement drive by the Directorate General of GST Intelligence (DGGI), which has issued several notices to online gaming companies since 2022. Authorities have argued that the entire contest entry amount collected from users, not just the platform fee, constitutes taxable value at 28% under the “betting and gambling” category.

However, gaming platforms have consistently maintained that skill-based games such as rummy, poker, or fantasy sports are distinct from gambling and should be taxed as online entertainment services at a lower rate.

The stay order is seen as part of a broader judicial trend of granting relief to gaming operators until the Supreme Court’s final word in the Gameskraft case.

Sandeep Sehgal, Partner–Tax at AKM Global, said the Court’s intervention underscores judicial prudence in allowing a uniform approach.

“The Supreme Court’s stay on the ₹123 crore GST notice issued to Baazi Games adds to the growing judicial pushback against tax demands in the online gaming sector. In line with earlier interim orders, the Court has halted proceedings and emphasized that such matters should wait until the Gameskraft verdict, which will decide whether skill-based games can be classified as gambling under GST,” Sehgal said.

“This order reinforces consistency in the Court’s approach and brings a measure of clarity to an industry grappling with multiple investigations and uncertainty over how online skill-based games are to be taxed,” he added.

A sector on pause

The online gaming industry, valued at over ₹25,000 crore, has faced an avalanche of tax notices collectively exceeding ₹1.5 lakh crore. Companies have expressed concern that the retrospective application of the 28% tax on full face value could cripple the sector.

The Gameskraft case, which involves a record ₹21,000 crore GST demand, is widely expected to serve as a landmark precedent determining whether games of skill can be equated with games of chance for taxation purposes - as well as have ramifications on the recent ban on online money gaming (which is also under challenge before Supreme Court).

Until the Supreme Court delivers its judgment, the Baazi Games stay order signals a pause in enforcement actions and provides short-term relief to a sector struggling with legal uncertainty and regulatory flux.

For now, the industry—and tax authorities alike—await the Gameskraft verdict, which will likely chart the course for the taxation framework governing India’s fast-growing online gaming economy.Read about our editorial guidelines and ethics policy