Supreme Court to Spotlight Online Gaming Tax Dispute, Set to Hear Challenges Against 28% GST in July
Gaming companies are contesting retrospective GST notices seeking payments amounting to thousands of crores, calculated at 28 percent of the bet’s face value.
The Supreme Court on Friday revealed plans to examine a series of appeals in July 2024, challenging tax notices that demand online gaming firms pay a hefty 28 percent Goods and Services Tax (GST) on the total value of bets.
Chief Justice of India, DY Chandrachud, leading the bench, disclosed this during a session where Baazi Networks Private Limited, the parent company of Baazi Games, contested the notices served to them.
Representatives for the gaming firms argued that while the government assured no immediate action, some orders might still be issued. Additional Solicitor General Venkatraman, representing the GST department, urged the lawyers to communicate to resolve the matter.
The Chief Justice hinted that the court would address the plea post the summer break and advised Charanya Lakshmikumara, representing several gaming companies, to arrange a meeting via email in July 2024 to fix hearing dates.
The Supreme Court currently grapples with a cluster of 30 petitions from online real money gaming firms, contesting retrospective GST notices seeking payments amounting to thousands of crores, calculated at 28 percent of the bet’s face value.
In December 2023, the apex court declined to halt these notices but agreed to hear the plea.
Among these petitions are 27 transferred from different high courts, two original petitions by Head Digital and Play Games24x7, and an appeal from the GST department challenging a Karnataka High Court ruling.
As of December 2023, these gaming firms faced 71 show-cause notices alleging GST evasion of Rs 1.12 lakh crore in 2022-23 and the initial seven months of 2023-24, excluding interest and penalties. Under section 74, which allows penalties of up to 100 percent of the tax demand, the total could surpass Rs 2.3 lakh crore, including interest.
Since October 1, 2023, a 28 percent GST has been levied on the full face value of online gaming bets by the GST Council, promising a review after six months. The industry advocates for calculating the 28 percent GST based on gross gaming revenue, rather than the bet’s face value.
However, the gaming companies faced a major setback when the GST Council retroactively imposed the tax. Per the Council’s interpretation, all online games involving bets played between August 2017 and October 1, 2023, regardless of skill or chance, must pay 28 percent GST on the full bet value, as they classify as gambling.
Baazi Games and All India Gaming Federation (AIGF) have declined to comment on the matter.
Meanwhile, Dr Aruna Sharma, Policy Advisor, Practitioner Development Economist, and Former Secretary to the GoI commented, “It is a positive development that multiple litigations in various courts have been consolidated in the Supreme Court to bring uniformity and offer a credible solution.
The issue that needs to be settled once and for all is not merely determining the GST rate, but also clarifying its retrospective application and, crucially, defining what falls under its tax gambit. The hard-earned winnings of players, post-TDS deductions, should remain untaxed, while GST ought to exclusively target the earnings of developers and platforms.”
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