From Tax Dispute to Jurisprudential Shift: Examining Gameskraft and Junglee Games

The twin rulings open several questions of contract law, property law, and constitutional federalism which were hitherto considered settled.

Oliver Wendell Holmes Jr., dissenting in Northern Securities Co. v. United States¹:

Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Introduction

The Supreme Court of India recently delivered two judgments that will be remembered for reshaping Indian tax and commercial law in equal measure. The twin rulings open several questions of contract law, property law, and constitutional federalism which were hitherto considered settled.

In State of T.N. v. Junglee Games India (P) Ltd.², the Supreme Court held that State Legislatures are competent to regulate and prohibit betting on all games, including games of skill, when played for stakes. It ruled that Entry 34 of the State List (betting and gambling) is not confined to games of chance but extends to all staking activities involving uncertain outcomes. The court further observed that neither the scope of the term “betting” nor the import of the conjunction “and” in the expression “betting and gambling” had been examined in earlier Supreme Court decisions.³ Additionally, the State enactments prohibiting online gaming were upheld as independently traceable to Entry 1 (public order) and Entry 6 (public health) of the State List.

In GST Intelligence Directorate v. Gameskraft Technologies (P) Ltd.⁴, the Supreme Court upheld the constitutional validity of the Central Goods and Services Tax (CGST) provisions governing goods and services tax (GST) on actionable claims arising from betting and gambling. It held that the 2023 Amendments to the Central Goods and Services Tax Act, 2017 (CGST Act), including Rules 31-B and 31-C, Central Goods and Services Tax Rules, 2017, are clarificatory and therefore retrospective. The court further ruled that online gaming platforms are not mere intermediaries but suppliers of actionable claims, as they create enforceable rights in potential winnings by facilitating games played for stakes. It held that both the creation and transfer of such actionable claims constitute a “supply” under GST. The court also clarified that compliance with the requirements for assignment or transfer of actionable claims under the Transfer of Property Act, 1882 (TP Act) is not a prerequisite for attracting GST liability.

The tax revenue involved in the Gameskraft case⁵ and connected matters exceeded INR 1 lakh crore. The court decided all substantive issues in favour of the Revenue. The only relief for taxpayers was its holding that the beneficial valuation provisions apply retrospectively. As a result, even for the pre-2023 period, the taxable value may be computed based on the amount paid in money or money’s worth, rather than the face value of the bet.

While the judgment resolves the immediate tax dispute, its reasoning will have far-reaching implications for contract law, property law, and constitutional federalism.

Redefining “betting and gambling”: Shift from skill-chance distinction to staking-based regulation

For over seven decades, Indian gaming jurisprudence distinguished betting and gambling from legitimate business activities through the chance-versus-skill test, treating games of chance as gambling and games of skill as lawful commercial pursuits. The distinction between playing with stakes, and without stakes was hitherto unheard of.

The Gameskraft and Junglee Games⁶ mark a significant departure from this approach. The court treated the staking of money on an uncertain outcome as the decisive factor, regardless of whether the underlying activity involves skill or chance. This fundamental shift in judicial approach echoes Justice Oliver Wendell Holmes’ observation in his book The Common Law (1881) that “the life of the law has not been logic; it has been experience”. The court appears to have recognised that online money gaming presents realities far removed from those underlying traditional gaming jurisprudence. Algorithm-driven platforms that design and control the gaming ecosystem, pool and manage stakes, match participants, and distribute winnings are fundamentally different from private games played among individuals. Coupled with growing concerns over addiction, financial distress, mental health issues, and suicides, these developments seem to have prompted a judicial reassessment of the traditional legal framework governing betting and gambling.

One of the most significant and immediate consequence of these rulings may be for the recently enacted Promotion and Regulation of Online Gaming Act, 2025 (Online Gaming Act) which prohibits online gaming and claims legislative competence under Entry 52 of the Union List⁷. The Supreme Court in the cases of Gameskraft⁸ and Junglee Games⁹ however treated online gaming involving the staking of money, whether the underlying game is one of skill or chance, as “betting and gambling” covered under Entry 34 of the State List. The court also sustained State regulation and prohibition of such activities with reference to Entries 1 (public order) and 6 (public health) of the State List.

This raises a serious question regarding the legislative competence of Parliament. In State of U.P. v. Lalta Prasad Vaish¹⁰, the nine-Judge Bench held that a specific State List entry confers exclusive legislative competence and cannot be overridden by Parliament’s power under the more general Entry 52 of the Union List. If online gaming with stakes is, in pith and substance, “betting and gambling” under Entry 34, the constitutional validity of the Online Gaming Act becomes open to serious doubt.

The issue of the legislative competence of Online Gaming Act is already before the Supreme Court.¹¹ The Union may now seek to sustain the legislation under the following alternative heads in the Union List relying on the Preamble and the Statement of Objects and Reasons of the Online Gaming Act: Entry 1 (defence of India); Entry 31 (post, telegraphs, telephones, wireless, broadcasting and other like forms of communication); Entry 42 (inter-State trade and commerce); Entry 45 (banking); and Entry 93 (offences against laws with respect to matters in the Union List). The key constitutional question will be whether any of these entries, individually or collectively, can support a law whose subject-matter has been held to be, in pith and substance, betting and gambling under Entry 34 of the State List.

“Actionable claims” in betting and gambling: A doctrinal contradiction

The concept of “actionable claim” traces its origins to the English law concept of “choses in action”, namely, personal property right enforceable only through legal action rather than physical possession.¹² In India, Section 3, TP Act codifies this concept but limits it to claims “which the civil courts recognise as affording grounds for relief”, thereby making enforceability its defining attribute.

Historically, wagering agreements were enforceable under English common law as applicable to India.¹³ Over time, however, courts were burdened with actions seeking to enforce speculative and wagering arrangements, which came to be regarded as socially undesirable and unworthy of judicial enforcement. This led to the enactment of the Wagers Act, 1848 and later Section 30, Contract Act, 1872, which declares wagering agreements void and bars suits for recovery of anything alleged to be won on a wager.

The Contract Act does not define the term “wager”. A wager is commonly understood as a promise to pay money or money’s worth upon the determination or ascertainment of an uncertain event.¹⁴ Halsbury’s Laws of England¹⁵ similarly recognises that an agreement to play for stakes, as well as an agreement to stake upon the sides or hands of those who play, constitutes a gaming agreement and is, in substance, a wager.

In the Gameskraft case¹⁶, the court nevertheless held that online gaming platforms create actionable claims in the nature of a chance to win. It distinguished between the unenforceability of a wager inter se participants and the existence of legally cognizable rights and obligations arising within the platform structure. On this basis, it held that participants possess enforceable rights against the platform capable of constituting actionable claims.

With utmost respect, this novel distinction finds little support in established principle of contract law or property law. Section 30, Contract Act specifically bars “any suit for recovering anything alleged to be won on any wager”, a prohibition directed at the nature of the claim rather than the identity of the defendant. More fundamentally, Section 30 embodies a clear legislative policy that courts should not be called upon to adjudicate disputes relating to wagering gains or losses. By recognising a legally cognizable and enforceable entitlement in participants to recover winnings from the gaming platform, the decision in the case of Gameskraft¹⁷ appears to depart from that policy and indirectly rendering wagering claims enforceable.

The court also placed reliance on the Constitution Bench decision in Sunrise Associates v. State (NCT of Delhi)¹⁸ which held that a lottery ticket constitute actionable claim. However, the question whether the non-enforceability of wagering agreements is fundamentally inconsistent with their characterisation as actionable claims was neither raised nor considered in the Sunrise Associates case. In the Gameskraft case, this issue was specifically raised and argued at considerable length; however, the judgment does not appear to fully address this conceptual tension.

The court further observed that Section 30, Contract Act does not render every collateral, ancillary, or connected transaction illegal or void ab initio. This proposition is well-established by the Supreme Court’s decision in Gherulal Parakh v. Mahadeodas Maiya¹⁹, where a partnership agreement entered into for carrying on wagering transactions was held to be valid and enforceable as it itself is not a wager but a separate and collateral contract. The Gameskraft judgment however neither discusses Gherulal Parakh nor identifies any distinct collateral contract from which the actionable claim is said to arise. On the contrary, the actionable claim recognised by the court appears to stem directly from the participant’s entitlement to receive winnings generated by the wagering activity itself. To that extent, the decision marks a significant departure from the traditional understanding of both wagering agreements and actionable claims.

Taxation without regard to legal consequences of the transaction

The Gameskraft judgment²⁰ takes the further view that procedural and substantial formalities governing the transfer or assignment of actionable claims under the TP Act are irrelevant for GST purposes. Since GST is a tax on supply rather than on transfer in the strict property law sense, the court holds that both the creation and the transfer of an actionable claim can constitute a taxable supply, and that contractual restrictions on transferability do not negate GST liability.

This approach departs from the settled principle that tax liability attaches to the legal and commercial reality of a transaction, not a deemed approximation of it. The Supreme Court has repeatedly held that a charging provision directed at a defined legal event cannot apply unless that event has occurred in law. CIT v. Balbir Singh Maini²¹. Similarly, in CIT v. Motors & General Stores (P) Ltd.²² are illustrations of this principle.

By holding that compliance with Section 130, TP Act is irrelevant to the existence of a taxable supply, the case of Gameskraft permits an actionable claim to be taxed as “supplied” even when it has not been transferred in law. This effectively creates two parallel regimes governing the same property or interest: one under the general law, where proprietary consequences depend upon compliance with prescribed formalities; and another under tax law, where liability may arise even though those consequences have not materialised. The judgments thus decouple taxability from the legal event that ordinarily gives rise to it, marking a significant departure from established principles of tax jurisprudence.

Conclusion

The significance of the Gameskraft²³ and Junglee Games²⁴ decisions extends far beyond tax and regulatory law. By treating wagering entitlements as actionable claims and disconnecting taxability from the legal requirements governing the creation and transfer of rights, the judgments recast foundational principles of contract law, property law, and tax jurisprudence. The consequences of these decisions are therefore likely to be felt well beyond the online gaming industry and GST litigation.

Courts often recalibrate legal doctrine in response to changing social and commercial realities. The rise of organised online gaming, its substantial revenue implications, and the social harms associated with online money gaming undoubtedly presented the court with concerns that were absent when many of the established principles governing wagering agreements were developed. Yet, legal evolution must rest on principle, not merely expediency.

Whether the Gameskraft and Junglee Games judgments represent a principled evolution of the law or an exceptional response to the challenges of online gaming remains open to debate. What is clear, however, is that their impact extends well beyond the disputes they resolved. Their lasting significance will lie not in the tax they generate, but in whether the doctrinal shifts they introduce endure beyond the context that produced them.