[Varun Soni is a recent graduate from the National Law School of India University, and an incoming associate at AZB and Partners]
[Continued from Part I]
The Group of Ministers Proceedings: An analogy to the Chief Commissioners’ Conference in Vatika
The Group of Ministers (GoM) on Casinos, Race Courses and Online Gaming was constituted in 2021. The Group submitted two reports, considered at the 47th GST Council meeting (held in June 2022) and the 50th GST Council meeting (held in July 2023), respectively. The proceedings of both meetings, which are a matter of public record, reveal something that the Vatika Township Court would have found material.
At the 47th Council Meeting, the GoM’s first report recommended, among other things, that GST at 28% be levied on online gaming at the full value of the consideration, “without making a distinction such as games of skill or chance etc.” The deliberations at that meeting turned substantially on whether the three activities, online gaming, horse racing, and casinos, could be taxed under the existing framework at all, or whether legislative amendment was necessary. When a council member from Delhi inquired about the place of supply, the committee replied that it “would” be the recipient’s location. The Revenue Secretary’s comment at the 50th Council Meeting is acutely relevant for this discussion. When the Council moved towards formalising the decision to amend Entry 6 of Schedule III, the Secretary stated that “claims for retrospective tax would continue, but there would be no matter of dispute with regard to prospective implementation.” The amendment was understood, by the Revenue’s own leadership, as creating prospective clarity, with the retrospective demands being contested terrain rather than settled law.
More significantly, the GoM Convenor (the Chief Minister of Meghalaya) acknowledged at the 50th Council Meeting that the second GoM report remained “inconclusive due to complexity of the issue” and that ambiguity persisted regarding the differentiation between games of skill and games of chance, and by implication, regarding their taxability. He further noted that “the definition must be amended” to bring online gaming within the actionable claims framework definitively. The final Council decision at the 50th meeting was framed as a decision “to clarify that actionable claims supplied in Casinos, Race course and Online gaming are also under the purview of GST… Accordingly, the law may be amended to provide clarity on the matter.” The press release that followed the 50th Council meeting stated that “the GoM, in its second report, has recommended that since no consensus could be reached on whether the activities of online gaming, horse racing and casinos should be taxed at 28% on the full-face value of bets placed or on the Gross Gaming Revenue (basically the platform fee), the GST Council may decide.” It was after the GoM deliberations on the levy reached a deadlock that the council brought in the amendments.
In Vatika Township, the Chief Commissioners’ Conference resolved that “…levy of surcharge on undisclosed income is a matter of uncertainty and is prone to litigation. In the circumstances, it is suggested that section 113 may be amended retrospectively in order to provide for levy of surcharge at the rate applicable to the assessment year relevant to the financial year in which the search was conducted.” The Vatika Township Court treated this Conference record as doing two distinct kinds of work. First, it took it as the Department’s own admission that the pre-amendment provision could not, as it existed, sustain the levy. The court read this as a confirmation from the Revenue’s own institutional voice that the position was unsettled. Second, the Court noted that the Chief Commissioners had expressly proposed a retrospective fix, and that the Parliament chose to make the amendment prospective regardless.
The GoM proceedings reveal an almost identical pattern. The Revenue’s own deliberative body found the existing legal framework insufficient to sustain the demand, recommended legislative amendment to provide clarity, and that amendment was enacted prospectively, with retrospective application remaining a matter of explicit dispute rather than settled entitlement. And while section 164 of the CGST Act confers powers on the Central Government to enact rules with retrospective effect, the amendments were not notified under the said section read with section 15(5). The parallel is structurally identical to the evidentiary framework that Vatika Township treated as probative in favour of the assessee, yet the two-judge bench in Gameskraft reached the opposite conclusion whilst citing the constitutional bench in Vatika Township.
The Court’s Answer and Where It Falls Short
The Supreme Court in Gameskraft upholds the levy and holds that the 2023 amendments are clarificatory. Its reasoning can be explained in three parts.
On Rule 31A’s statutory basis, the Court holds that whether Rule 31A traces its source to section 15(4), section 15(5), or the general power under section 164, “the foundational statutory requirement remains identical and intact” once the GST Council recommendation is established. The controversy about the precise source “loses much of its significance.” The Council recommendation is a necessary but not a sufficient basis for a mandatory valuation rule. Section 15(5) imposes an independent requirement that the class of supply be specifically notified before the non-obstante valuation mechanism is activated. Whether that notification was issued in the legally required form before October 2023 is a question the Court does not squarely answer. Conflating the procedural requirement of Council recommendation with the substantive requirement of a notified supply collapses a statutory distinction that the Parliament drew.
On section 2(105)’s deeming fiction, the Court constructs an independent finding across paragraphs 74.1 to 74.5 that gaming companies are suppliers even without the deeming fiction, because the entire transactional structure is created and administered by the platform. The deeming proviso is described as merely “reinforcing” a position independently established. There’s nothing wrong with this reasoning on its own terms, but it sidesteps rather than answers the main point of contention. Even if gaming companies were factually suppliers before October 2023, the question remains whether the statutory machinery for fastening and measuring that liability was complete before that date. A correct identification of the taxpayer does not cure a deficient valuation framework and a framework of levy, especially when the same were being actively deliberated by policy makers.
On the GoM proceedings, the Court does not engage with the record of deliberations at the 47th and 50th Council meetings at all. Given that those proceedings reveal that the Revenue Secretary himself acknowledged that retrospective claims would remain a matter of dispute, and the GoM Convenor described the legal position as insufficiently clear to impose a levy without amendment, the failure to engage with this evidence is a significant gap. The Vatika Township Court treated the analogous conference record as dispositive of the Revenue’s argument. The Gameskraft Court does not afford the GoM record the same weight, without explaining why it should not.
Conclusion: The Argument That Remains Open
For the pre-October 2023 demands to survive, Rule 31A(3) must have been a valid mandatory valuation rule during that period, with the correct statutory parent and the required supply notification in place. Gameskraft does not establish this with the rigour that Vatika Township demands. The Court finds that the underlying charge existed. It does not satisfactorily establish that every component of that charge, including a validly prescribed measure of value, was simultaneously set in place by the written law that was in force before the amendment.
The argument made in this post can be summarised briefly. Vatika Township holds that a fiscal levy is legally cognisable only when all four components of the charge (the taxable event, the person liable, the rate, and the measure of value, are simultaneously ascertainable), and that an amendment supplying a missing component for the first time is not rendered clarificatory merely because it is styled as such. Measured against that standard, the pre-October 2023 GST framework for online gaming displayed at least one structural gap that the Gameskraft Court’s reasoning does not close, namely the absence of a valuation rule validly notified under Section 15(5), and the proceedings of the GoM before the 47th and 50th GST Council meetings supply the same kind of institutional acknowledgment of ambiguity that the Chief Commissioners’ Conference minutes supplied in Vatika Township itself. The Court’s finding that gaming companies were suppliers independent of the section 2(105) deeming fiction, and its treatment of rule 31A’s statutory source as immaterial once the Council recommendation is established, answer the adjacent questions without closing this one. That gap is the one Vatika Township was designed to close. A levy without a complete and ascertainable charge is not a levy that can be retrospectively completed by calling the completing provision clarificatory. The Constitution Bench said so clearly in 2014, and the two-judge bench in Gameskraft does not explain why that standard should yield a different result on facts that closely track the earlier case. The deliberations of the GoM and the GST Council, which the Gameskraft Court set aside without engagement, provide the kind of institutional acknowledgment of ambiguity that the Vatika Township court would have given substantial weight to. Whether the bench in 2026 has given that standard its full weight is a question that survives this round of litigation.
[Concluded]
– Varun Soni
