Supreme Court Stays Rs 1.12 Trillion GST Notices to Online Gaming Firms

The Supreme Court on Friday stayed the show-cause of notices of Rs 1.12 trillion charged as Goods and Services Tax (GST) against online gaming companies.

The proceedings pertaining to these notices are hereby put on hold until the apex court adjudicates upon the matter. Further, the court has directed the consolidation of the cases of a set of gaming companies, and the next date of hearing is fixed for March 18 in the year 2025.

While fighting over the interpretation regarding GST applicability on online gaming activities, the government has argued that a 28 percent GST should be applied to the total contest entry amount, which would practically mean taxing the entire prize pool, while contest gaming companies argue that GST must be levied only on their commission-sharing websites, pointing out that many of these games are not considered pure luck but more of a skill.

Saurabh Agarwal, Tax Partner with EY, shared that the eventual hearing slated for March will hold the key to shape the regulatory landscape, ensuring 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.

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 sounded several alarms concerning all possible aggressive recovery actions that could be undertaken by the tax authorities based on these notices. The fallout for companies would be highly unfortunate as such acts could prove disastrous to their operation, particularly because of the highly controversial nature of the GST claims itself.