Supreme Court stays Rs 1.12 trillion GST notices to online gaming firms

The apex court has also mandated the consolidation of cases involving a group of gaming companies, with the next hearing set for March 18, 2025

The Supreme Court on Friday stayed Goods and Services Tax (GST) show-cause notices amounting to a staggering Rs 1.12 trillion against online gaming companies.

 

The apex court has ordered that all further proceedings under these notices be suspended until a definitive resolution is reached. The court has also mandated the consolidation of cases involving a group of gaming companies, with the next hearing set for March 18, 2025.

 

At the core of this dispute is the interpretation of GST applicability on online gaming activities. The government insists that a 28 per cent GST should apply to the total contest entry amount, which effectively taxes the entire prize pool. In contrast, gaming companies contend that GST should only be levied on their platform fees or commissions, emphasizing that many of these games rely on skill rather than chance.

 

Saurabh Agarwal, Tax Partner, EY, said that the upcoming final hearing in March will be pivotal in shaping the regulatory landscape and ensuring a fair and transparent taxation regime for this sector.

 

“The Supreme Court’s decision to stay proceedings on show-cause notices issued by the Directorate General of GST Intelligence (DGGI) marks a significant development for the online gaming and casino industries. This move underscores the importance of legal clarity and due process, especially in sectors experiencing rapid growth and regulatory evolution,” Agarwal said.

 

Online gaming companies cheered the respite.

 

Abhishek A Rastogi, the founder of Rastogi Chambers, who is representing the gaming companies in the court, said, “This stay not only alleviates immediate pressure on gaming companies, preventing potential coercive actions from tax authorities, but also serves to protect the interests of the Revenue authorities. By halting the proceedings, the Supreme Court ensures that these demands will not become time-barred during the litigation process, allowing for legal clarity without procedural obstacles.”

 

The online gaming sector had expressed serious concerns regarding aggressive recovery measures that could be initiated by tax authorities based on these notices. Companies argued that such actions could critically jeopardize their operations, particularly given the contentious nature of the GST claims.