GST On Online Gaming: Supreme Court Stays Show Cause Notice Proceedings
The Supreme Court on Friday stayed proceedings with respect to all show cause notices to online gaming companies until final disposal of case.
"This development underscores the evolving legal and policy landscape for online gaming in India, with the Supreme Court's eventual ruling likely to shape the future of the industry," said Abhishek A Rastogi, founder of Rastogi Chambers, who is representing the gaming companies before the Supreme Court.
During the proceedings, the tax department informed the apex court that some show cause notices may go time barred if a stay is not imposed on the proceedings. The total tax demand from these e-gaming companies is approximately Rs 1.50 lakh crore, the tax department said.
Gaming companies also feared a coercive action from the department and sought a stay on proceedings with respect to the show cause notices.
The Supreme Court will now take up the case for a final hearing on March 18.
Last year, the top court had agreed to hear pleas challenging the retrospective application of the revised GST rate of 28% levied against online gaming companies. The e-gaming firms are challenging the tax department's stance to impose 28% GST on the full-face value of the bets for the period prior to Oct. 1, 2023.
Since a lot of petitions on this issue were ongoing in various high courts of the country, the top court transferred all the cases before itself to have an authoritative ruling once and for all.
According to changes introduced by the government in the GST Act in August, online gaming was added to the list of actionable claims—along with lottery, betting and gambling—that attract 28% tax. This change was to be made applicable on Oct. 1, 2023.
It was decided that the tax will be levied at the point when the deposit is made, irrespective of whether the activities are a game of skill or chance, as long as they are played with stakes.
The government has taken the stance that this liability was "pre-existing" and that the law has not been amended in this regard but only "clarified."
This change led to a battery of GST notices being slapped on these companies, with demands that are running into multiples of their earnings. It has culminated in a huge difficulty for these companies as they were under the impression that the new rate of tax would be applicable prospectively from Oct. 1, 2023, onwards.
In 2023, the top court also issued a stay on a Karnataka High Court ruling that quashed a Rs 21,000-crore show cause notice to Gameskraft Technologies Pvt. by the Directorate General of GST Intelligence.
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