• Notification Date: 11-01-2024
• Notification No: N/A

SC seeks Govt's response on pleas by Online Gaming challenging 28% GST

The Supreme Court (SC) on Monday directed the Centre and Goods and Services Tax (GST) department to file their response within two weeks to the pleas by online gaming companies challenging the 28 per cent GST on all forms of online real-money gaming. 

The bench, led by Chief Justice of India DY Chandrachud, issued notice in pleas by online gaming companies such as Head Digital Works, Games 24/7, and Dream 11 challenging the government's decision to retrospectively impose the tax on the full value of the online bets placed, not on the gross gaming revenue. 

The case is likely to be heard in a couple of months. 

The GST department has also sought to transfer all cases on the same issue from other high courts to the Supreme Court. Senior advocate Harish Salve appeared for the online gaming companies while Additional Solicitor General Venkatraman appeared for the GST department and Union of India. 

The Goods and Services Tax (GST) Council last year decided to impose a flat 28 per cent tax on the face value for online gaming, casinos, and horse racing and accordingly brought amendments in GST laws (CGST Act and IGST Act) in the monsoon session. The new rule was effective from October 1, 2023. The amendments provide that GST will be levied on entry-level bets on online gaming platforms and not on what players pay in each game from the winning amount. 

The apex court on December 15 had refused to grant interim relief against the GST demand notices to online gaming companies. 

The court had said it will consider the case on the government's decision to impose 28 per cent GST on online gaming companies retrospectively on the full value of the bets placed, and not on the gross gaming revenue. 

Online gaming companies had argued that 28 per cent tax is applicable only from October 1. Meanwhile, the government said the October 1 revision was only to give clarity to a law that was already in force. The government said the demand for tax dues is not backdated. 

The Supreme Court (SC) in September last year stayed the Karnataka High Court's ruling quashing the GST authority’s tax demand order of Rs 21,000 crore on Bengaluru-based gaming firm Gameskraft. 

The Karnataka High Court on May 11 quashed the Rs 20,989 crore show cause notice against Gameskraft for alleged GST evasion. This was the biggest such claim in the history of indirect taxation. 

The GST notice alleged that Gameskraft allowed its clients to place money bets on games played online, saying the company was promoting online betting through card, casual, and fantasy games like Rummyculture, Gamezy, and Rummytime. 

Authorities had, therefore, slapped a 28 per cent tax — which is applicable on games of chance/betting and gambling — on the firm on a betting amount of about Rs 77,000 crore.