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Supreme Court Hears Day 9 of GST Case: Escrow, GST, and Online Gaming Under Scrutin

On 16th May, 2025, Day 9 of the Supreme Court’s hearings in the Gameskraft batch of cases featured intense exchanges between senior advocates. At the heart of the debate was the applicability and validity of GST provisions on online gaming platforms.

Senior Advocate Harish N. Salve, representing the gaming companies, resumed his arguments by asserting that online gaming platforms do not give rise to actionable claims. Referring to the Quistclose Trust principle, he explained that players’ funds are held in escrow accounts and are fully accessible to them at any time. “The player can withdraw the funds at will,” he emphasised.

Salve contended that such funds do not constitute a property right and backed his stance with references to several judicial precedents. He also walked through key provisions of the CGST Act—specifically Sections 7, 9, and 15—and Rule 31A of the CGST Rules. Salve argued that Section 15(5) must be read in consonance with Section 15(1), emphasising that delegated legislation cannot arbitrarily determine the value of supply.

Central to his argument was the concept of escrow, a financial arrangement commonly used in high-value or high-risk transactions. In such arrangements, a neutral third party—the escrow agent—holds and manages funds or assets on behalf of the transacting parties until all contractual obligations are fulfilled.

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Escrow mechanisms are used across various domains, including real estate, online commerce, mergers and acquisitions, and intellectual property transactions. For example, in a property deal, the buyer deposits funds into an escrow account, which are only released to the seller once inspections are complete, documents are signed, and all terms are met. This setup safeguards both parties, minimising the risk of fraud or loss.

In the context of online gaming, Salve emphasised that the escrow structure enhances financial transparency and ensures that platforms do not gain ownership over players’ funds. This distinction, he argued, is crucial in evaluating whether GST should apply in the manner currently proposed.

Salve’s detailed arguments spotlight the legal and financial nuances of escrow, and the hearing continues to unfold as the Court examines the broader implications for India’s online gaming industry. The outcome remains eagerly anticipated. Gutshot Magazine keeps tabs on all the latest news and updates about rummy and other real-money gaming apps and the industry as a whole. 

For more news and updates, keep reading Gutshot Magazine. 

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