GST On Online Gaming: Supreme Court To Hear Industry's Pleas Against Tax Notices On Jan 10

The Supreme Court on January 10 will take up the issue of whether a stay should be granted on show cause notices in the e-gaming retrospective taxation case until the matter is finally settled.

This comes after online gaming companies on Wednesday sought a stay on show cause notices fearing a coercive action from the tax authorities. The companies contended that this stay will assure them that no demands will be made until the top court gives a final verdict on the issue.

As a result, the top court has agreed to take up the case on January 10, i.e., on Friday, to consider the issue of whether a stay on the notices should be granted or not. The court is also likely to fix a final date of hearing in the matter on Friday itself.

The total tax demand from these e-gaming companies is approximately Rs 1.08 lakh crore.

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.