Delta Corp to SC: GST based on ‘Imaginary Values’, hearing to continue next week
The Supreme Court on Monday said that the matter will continue to be heard till next week, extending the July 25, 2025 as the date for the final hearing
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The leading casino operator Delta Corp Limited and its subsidiaries while challenging the matter in which Goods and Services Tax (GST) has been levied on casino operations. Represented by Senior Advocate Vikram Nankani, the petitioners argue that the GST demands based on the “gross bet value” (GBV) are arbitrary, ultra vires, and in violation of statutory provisions.
The high-stakes legal showdown that could redefine India’s online real money gaming landscape, the Supreme Court on Monday said that the matter will continue to be heard till next week, extending the July 25, 2025 as the date for the final hearing in a case involving show-cause notices issued to several online gaming firms. The case, with an estimated financial impact of ₹2.5 lakh crore, is one of the biggest tax battles in India’s history.
Senior advocate Nankani on Monday stated that the case revolves around the interpretation and applicability of GST valuation rules on casinos since the introduction of the new tax regime in July 2017. The petitioners assert that the tax ought to be levied on Gross Gaming Revenue (GGR)—the difference between chips bought and chips returned by customers—rather than the total value of bets placed, which they argue is a notional and inflated measure.
Legal Backdrop: Pre- and Post-GST Scenario
Senior advocate Nankani infront of Division bench of the Supreme Court comprising Justices JB Pardiwala and R. Mahadevan stated that before GST came into effect on July 1, 2017, casinos in Goa, where Delta Corp operates, were paying entertainment tax on actual revenue (GGR) under the Goa, Daman, and Diu Entertainment Tax Act, 1964. This practice continued post-GST under Section 15(1) of the CGST Act, which prescribes tax based on “transaction value”—i.e., the price actually paid for the service.
However, this changed in January 2018 with the introduction of Rule 31A via Notification No. 3/2018, which attempted to prescribe valuation rules for activities such as betting and gambling. Casinos were treated on par with lotteries and horse racing, where betting typically involves tickets with a face value.
Petitioners' Stand: Misclassification and Legal Overreach
The petitioners argue that Rule 31A does not apply to casinos, as there is no fixed “face value of the bet” in casino gaming. Unlike lottery or horse racing tickets, bets in casinos involve a fluid exchange of chips without a fixed face value.
They further point out that Rule 31C, introduced in September 2023 specifically for casinos, effectively acknowledges that Rule 31A was never meant to apply to them. This newer rule mandates taxation based on the purchase value of chips, reinforcing the casinos' argument that GGR is the correct metric.
The petition contends that the lack of a proper notification under Section 15(5) of the CGST Act until September 2023 also renders the earlier valuation methodology without legal backing. Until such notification, only Section 15(1) could be relied upon—which supports the GGR method.
Government’s Shifting Stance Adds Confusion
The Department had originally classified gambling under services and levied a 28% GST. However, it simultaneously applied valuation methods suitable for “goods” (under the definition of “actionable claims”) and relied on Rule 31A for calculation—an approach the petitioners label as “incoherent and contradictory.”
Subsequent notifications in 2023, including Notification No. 51/2023, aimed to rectify this by introducing a new regime for valuation based on specified actionable claims and removing “gambling” as a service altogether. These back-and-forth changes, the petition claims, reflect the government’s own confusion and inconsistency.
Global Standards and Legal Precedents
The petition draws upon international taxation practices and legal precedents, including those from the Supreme Court of the United Kingdom and the Court of Justice of the European Union, which uphold GGR as the appropriate base for taxing gambling activities. These courts have ruled that only the net revenue retained by the operator (after deducting winnings) constitutes actual consideration and thus is taxable.
The petitioners also cite multiple Supreme Court decisions to argue that executive circulars cannot override statutory law, and that valuation rules must be notified in accordance with specific legislative mandates.
Casinos Seek Relief
Delta Corp and others have urged the Supreme Court to strike down Rule 31A as ultra vires the CGST Act, at least in its application to casinos, and to uphold the industry’s longstanding practice of discharging GST on GGR. They argue that the current tax method leads to over-taxation on hypothetical values, has no legal foundation, and threatens the viability of their operations.
The matter is now under active consideration by the Supreme Court, with implications likely to affect not just casinos, but also other industries grappling with valuation complexities under GST.
