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The settled position in law has been the classification of online games as game of skill and thus, outside the purview of betting and gambling. However, the industry being in nascent stage and lack of specific categorisation of online games as game of skill by the government has resulted in ambiguity. The inconsistencies among state laws related to scope of betting and gambling and prohibition of even rummy games in some states has further aided to uncertainty. The ambiguity has the potential to raise unnecessary tax demands beyond the rake fee earned by online gaming platforms. Such aggressive litigation would significantly impact the sustainability of the online gaming business.
The lack of clear valuation principles and ambiguities in levying GST on the entire stake value vis-à-vis the rake fee element has caused regulatory uncertainty amongst industry players and has dampened the industry to an extent.