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Supreme Court to review challenges against retroactive 28% GST on online gaming companies
The Supreme Court has taken notice of the petitions filed by Head Digital Works and Games 24/7, two prominent online gaming companies. These pleas challenge the government’s decision to retroactively impose a 28 percent Goods and Services Tax (GST) on the total value of bets placed, rather than on the gross gaming revenue. As reported by Money Control, the Court has
directed the Centre and the GST department to submit their responses within two weeks. Anticipated to be heard in a few months, the case has prompted the GST department to seek a transfer of all related cases from various high courts to the Supreme Court. Representing the online gaming companies, senior advocate Harish Salve appeared before the Court, countered by Additional Solicitor General Venkatraman representing the GST department and Union of India. In a prior instance on December 15, the Court
declined interim relief against the GST demand notices served to Head Digital Works and Games 24/7. The court however, indicated a willingness to review the constitutional validity of the government’s decision to retrospectively levy 28 percent GST on the full value of bets, effective from October 1. This legal battle stems from a disagreement
over GST rates for online gaming companies. While the firms argue that the 28 percent tax applies only from October 1, 2023, the government contends that the revision merely
clarified an existing law. Hence, the government declares that the tax demand isn’t backdated. In August 2023, the GST Council amended
the law, specifying that all online games involving bets, regardless of skill or chance, would attract a 28 percent GST rate based on the total value of bets placed, not on the gross gaming revenue. Consequently, online gaming firms received substantial tax demands, prompting concerns that this imposition could potentially ruin the entire industry. Show- cause notices alleging tax evasions amounting to Rs 1 lakh crore were served to these companies in 2023. September 2023 saw the apex court halting
the judgment of the Karnataka High Court, which had nullified a GST notice against Bengaluru-based online gaming company Gameskraft Technology, citing an alleged evasion of Rs 21,000 crore. Gameskraft Technology Private Limited
(GTPL) faced accusations of promoting online betting through various games like Rummy Culture, Gamezy, and Rummy Time without issuing invoices to customers, as alleged by officials. GST authorities imposed a 28 percent tax
on betting amounts of nearly Rs 77,000 crore, citing GTPL’s involvement in allowing players to place bets using money stakes on online card games.
Govt plans to file a plea seeking the transfer of all GST-related online gaming cases to the Supreme Court
The Union government has made a significant move in the ongoing dispute over the retrospective imposition of Goods and Services Tax (GST) on online gaming. On January 8, it pledged to file a petition requesting the transfer of all related cases from various high courts to the Supreme Court. During the court proceedings, Additional Solicitor
General Venkatraman, representing the Union government and the GST department, confirmed the filing of this plea. Renowned senior advocate Harish Salve, appearing for the online gaming firms, and Chief Justice of India DY Chandrachud acknowledged that centralizing these cases in the apex court would ensure consistency. Chandrachud expressed his inclination to approve the transfer once the petition was officially submitted. Venkatraman emphasized the alignment of all
governmental arms in handling the online gaming cases, dismissing reported differences in opinions within the media. Simultaneously, the Supreme Court issued
notices in response to plea by online gaming companies such as Head Digital Works and Games 24/7. These companies challenged the government’s decision to retrospectively impose a 28 percent GST on the total value of bets placed, rather than on the gross gaming revenue. A prior report from November 2023 by
Moneycontrol had hinted at the government’s intention to consolidate all GST-related online gaming cases under a unified principle in the Supreme Court. According to a senior finance ministry official, the goal was to ensure a singular interpretation of the law, given the cases’ concentration on the taxability aspect. The controversy stemmed from the GST Council’s
approval of a 28 percent GST on all online games starting from October 1, 2023. Additionally, it declared that from 2017 until October 1, 2023, all online games involving bets, regardless of skill or chance, were liable to pay a 28 percent GST on the total bet value, citing it as gambling. Consequently, these gaming companies have collectively received GST notices totaling Rs 1 lakh crore this year.
24 FEBRUARY 2024
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