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Supreme Court to hear TN Government’s challenge to high court decision striking down online rummy and poker ban
The Supreme Court announced its decision to review the Tamil Nadu government’s appeal challenging the Madras High Court’s ruling that invalidated a section of its online gaming law, specifically the prohibition of skill-based games like online rummy and poker. The case was presented today before a 3-judge
bench led by the Chief Justice of India. The court acknowledged that similar appeals from a previous legal battle involving the governments of Tamil Nadu and Karnataka are already awaiting consideration in the apex court. Consequently, the court has consolidated the new appeal with the earlier pending appeals from Tamil Nadu and Karnataka to address the overall question of whether states have the authority to ban online games involving stakes. However, no specific date has been set for the final hearing. As reported by Money Control, this latest case is
linked with the Tamil Nadu government’s 2022 appeal challenging the Madras High Court’s decision to nullify the Tamil Nadu Gaming and Police Laws
dispute between the State and the Union regarding legislative authority over the subject of gambling, which falls under the jurisdiction of the individual states in India. In November 2023, the Madras High Court upheld
(Amendment) Act of 2021, which had imposed a suspension on online games. In April 2023, the All India Gaming
Federation (AIGF), along with real-money gaming firms Gameskraft, Games24x7, and Head Digital Works, filed a petition in the Madras High Court, challenging the constitutionality of the Tamil Nadu government’s online gambling law. The contested law had banned online rummy and
poker in the southern state, categorizing them as games of chance and bringing them under the domain of online gambling. This move triggered a
the law but set aside the provisions prohibiting skill-based online gaming, such as online rummy and poker. The court maintained that the state government is free to establish rules regulating the duration of play or setting age limits for these online money games. The roots of this legal battle trace back to 2021
when the Tamil Nadu government quickly passed emergency legislation prohibiting all forms of online games, including skill-based ones, within the state. This legislation was a response to a tragic incident where a woman took her own life due to losses in online gaming. The Madras High Court, in early 2022, declared the law unconstitutional. The government appealed this decision, and the case is currently pending at the Supreme Court.
Potential relief for online gaming industry as government mulls over GST demands
According to sources, the Union government is considering softening its stance on the goods and services tax (GST) demand notices issued to online gaming companies. The move comes as the government acknowledges the significant challenges faced by gaming firms if they are required to fulfil GST demands raised for the period between July 2017 and March 2023. CNBC reported that sources suggest that the government is now acknowledging that it’s
impractical for these companies to meet unrealistic tax demands. It is reported that the government has sought legal opinion on potential resolutions to the ongoing dispute with online gaming firms.
In 2022-23 and the first seven months of 2023-24, online gaming companies received a total of 71 show-cause notices related to GST evasion, amounting to Rs. 1.12 lakh crore, as disclosed in the Rajya Sabha last year. Minister of State for Finance Pankaj Chaudhary clarified in response to a written question in December 2023 that as these notices are pending adjudication, the final GST demand has not yet been determined under the provisions of the CGST Act, 2017. The government’s decision to impose a 28%
tax on online gaming companies, based on the total funds deposited for playing online games, in
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August 2023 has triggered disputes within the industry. Some firms, such as Mobile Premier League, have resorted to layoffs because of this. The difference arises from the interpretation of the tax rate, with companies arguing that the 28% tax should apply only from October 1, 2023. However, the government maintains that the revision on October 1 merely clarified an existing law and did not introduce a retrospective tax. Meanwhile, the matter concerning GST demands on online companies is under consideration in the Supreme Court. Additionally, the government has challenged a Karnataka High Court order that nullified a Rs. 21,000 crore GST demand on Gameskraft, taking the dispute to the apex court for resolution.
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