The Supreme Court on Friday stayed showcause notices issued by GST authorities to online gaming companies and casinos, alleging tax evasion exceeding Rs 1 lakh crore. The bench, comprising Justices J B Pardiwala and R Mahadevan, stated that the matter requires detailed hearing and ordered that all proceedings against the gaming companies be stayed until further notice.
GST authorities had issued showcause notices in October 2023 to several online gaming companies, accusing them of tax evasion. These notices are related to the government’s amendments to GST laws, which mandated overseas online gaming firms to register in India starting October 1, 2023.
In August 2023, the GST Council clarified that a 28% tax would be levied on the full value of bets placed on online gaming platforms, a decision that faced significant opposition from the gaming industry.
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Several gaming firms, including Games 24×7, Head Digital Works, and the Federation of Indian Fantasy Sports, challenged the GST demands in various high courts. The companies argued that the tax claims by revenue authorities were unjustified.
The top court previously allowed a petition from the Centre, consolidating cases from nine high courts to address the issue comprehensively. It also stayed a Karnataka High Court verdict that had quashed a GST notice worth ₹21,000 crore issued to an online gaming firm.
Additional Solicitor General N Venkataraman, representing the GST department, informed the court that some of the showcause notices would lapse in February 2024. The Supreme Court has scheduled the next hearing for March 18, 2024, to further deliberate on the issue.
The stay order provides temporary relief to gaming companies as the industry awaits a definitive ruling on the application of the 28% GST. This decision will have far-reaching implications for the online gaming sector, which has been grappling with regulatory uncertainties since the GST Council’s announcement.
