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GST Case: Now, Escrow Comes Into Play

On 16th May, 2025, Day 9 of the Supreme Court’s ongoing hearings in the Gameskraft batch of cases was marked by intense exchanges between senior advocates. The central issue remained the validity of GST provisions as they apply to online gaming platforms.

Senior advocate Harish N. Salve, representing the gaming companies, continued presenting his arguments. He contended that online gaming platforms do not create any actionable claims. Citing the Quistclose Trust principle, he explained that players’ funds are held in escrow accounts and can be withdrawn at any time, stating, “The player can withdraw the funds at will.”

Salve argued that such funds do not constitute a property right and supported his position with references to multiple case laws. He also guided the bench through Sections 7, 9, and 15 of the CGST Act, along with Rule 31A of the CGST Rules. He maintained that Section 15(5) must be interpreted in harmony with Section 15(1), and that rules cannot arbitrarily determine the value of supply.

Escrow is an essential financial aspect, especially when it has an international component. It is a financial arrangement in which a third party holds and manages funds or assets on behalf of two parties involved in a transaction.

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ALSO READ: Advocate Harish Salve Argues Constitutional Validity Of 28% GST

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This intermediary, known as the escrow agent, ensures that both parties meet the agreed-upon conditions before the transaction is completed. Escrow is commonly used in high-value transactions such as real estate, online sales, mergers and acquisitions, and even intellectual property deals. Its purpose is to protect all parties involved by providing a neutral holding place for money, documents, or other assets until the terms of the agreement are fulfilled.

For example, in a real estate transaction, the buyer deposits the purchase money into an escrow account. The funds remain there until inspections are completed, documents are signed, and the seller meets all contractual obligations. Once everything is verified, the escrow agent releases the funds to the seller and the title to the buyer.

Escrow adds a layer of trust and security, particularly in transactions where the parties may not know each other well. It minimises risk, reduces fraud, and ensures that no one suffers a financial loss if the deal falls through. In essence, escrow serves as a safeguard to ensure fairness and compliance in various types of financial transactions. With this latest salvo, it remains to be seen how the case plays out.

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