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Fresh GST dispute over Gaming cashbacks, bonuses to reach Rajasthan HC
Allinone Hax’s writ petition is expected to directly contest both the application of Rule 31B to promotional incentives and the underlying assumption that bonuses constitute part of taxable consideration.
The online real money gaming industy officials have criticised the department’s stance, calling it “prima facie frivolous” and inconsistent with established GST principles.
The ongoing standoff between India’s real money gaming sector and the Goods and Services Tax (GST) authorities has taken a fresh turn, with Allinone Hax Private Limited — the operator of popular platform Ludo Players — to file a writ petition in the Rajasthan High Court challenging the levy of GST on promotional bonuses and cashbacks.
It was on August 12, a bench comprising Justices J.B. Pardiwala and R. Mahadevan had reserved an order in GST online gaming Gameskraft batch of cases after 31 days of hearing.
This legal challenge comes amid an intensified enforcement push by the indirect tax department, which has issued notices to at least four online gaming firms over alleged non-payment of GST on various promotional incentives. These include signup bonuses, GST cashbacks, and other credits offered to users as part of player acquisition and retention strategies.
Naresh Yadav, founder of Ludo Players said, "We will be approaching Rajasthan High Court for relief next week. The claims of GST department is flawed and we will be challenging it. This action from GST authorities can lead to ripple effect impact the entire real money gaming industry and it is important that everyone in the industry should unite to tackle such kind of regulatory impositions."
The company has now written (copy of the letter is with Storyboard18) to Chairman of Central Board of Indirect Taxes and Customs Department of Revenue of the Ministry of Finance, Government of India seeking relief in the matter. Ludo Players has deposited Rs 25 Lakhs to protect the interests of the revenue during the pendency ofthe investigation.
New GST Dispute Beyond Retrospective Tax Battle
The latest notices are distinct from the ongoing high-stakes dispute over retrospective GST demands spanning 2017 to late 2023 — a battle that has already seen the Supreme Court reserving the judgment for prounouncement. Instead, the new dispute revolves around the interpretation of Rule 31B of the Central GST Rules, introduced in October 2023.
Under Rule 31B, the value of supply for online money gaming “shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player.” The tax department is now interpreting this to mean that bonuses and cashbacks — even when entirely funded by the gaming company — constitute amounts “paid on behalf of the player” and should therefore be taxed at the prevailing 28% rate.
Authorities Target Bonuses, Call Them Taxable Consideration
Bonuses and cashbacks are a common fixture in India’s online gaming ecosystem, often credited to a user’s wallet as non-withdrawable game credits. These incentives typically match or offset the GST paid by users on bets, allowing them to play more without spending additional money.
Tax officials argue that because these credits can be used for gameplay, they form part of the “consideration” for the gaming service. As per GST authorities, this interpretation applies irrespective of whether the player directly spends out of pocket for these credits.
A senior industry executive said that the GST department would be calculating tax liability on the “total value of promotional credits” disbursed since October 2023, potentially resulting in multi-crore demands against major operators.
Industry Pushback and Legal Preparations
Industry insiders say the tax department has already issued notices to several companies, demanding voluntary payment of the disputed tax amount to avoid further action.
A RMG operator said, “This has serious implications. Our business operations have been severely impacted, and we are being pressured to make voluntary payments to avoid further action. We believe the interpretation is flawed and detrimental to the sector. We are preparing to challenge this in the Supreme Court next week.”
Allinone Hax’s writ petition is expected to directly contest both the application of Rule 31B to promotional incentives and the underlying assumption that bonuses constitute part of taxable consideration.
The online real money gaming industy officials have criticised the department’s stance, calling it “prima facie frivolous” and inconsistent with established GST principles. "Traditionally, discounts or promotional offers funded by a supplier are excluded from taxable consideration, unless they are provided in exchange for additional supply or service."
“The department’s stand prima facie appears frivolous and untenable, as a discount can never be part of the consideration for GST. The interpretation here stretches the definition of ‘money’s worth’ far beyond its intended scope,” the official said.
Ripple Effect for the Gaming Ecosystem
The online gaming sector, which has already been grappling with the impact of the 28% GST rate on player deposits since October 2023, fears that this latest dispute could lead to another wave of crippling tax demands. Industry representatives warn that extending the department’s interpretation to all promotional incentives could significantly increase operational costs and reduce user engagement.
Several firms are now exploring the possibility of forming a coordinated legal front to challenge the department’s position. There are indications that more petitions could soon be filed in the Supreme Court, with industry bodies and platforms considering joint representation.
For Allinone Hax and others in the industry, the fight is now as much about legal clarity as it is about survival in an increasingly challenging regulatory environment. As the Ludo Players operator takes its case to the country’s highest court, the outcome could redefine the rules of the game for promotional marketing in India’s real money gaming sector.
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