Supreme Court To Hear Gaming Firms' Challenge On DGCI’s 28 Percent GST

Supreme Court To Hear Gaming Firms' Challenge On DGCI’s 28 Percent GST

The companies are facing thousands of crores in taxes on full value of bets

The Supreme Court has agreed to take up petitions by online gaming companies and casinos seeking a stay on proceedings related to tax notices issued by the Directorate General of the Goods and Services Tax Intelligence (DGGI) since 2023.

The gaming firms had challenged the decision of the government to retrospectively impose a 28 percent Goods and Services Tax (GST) on the full value of the bets placed, and not on the gross gaming revenue.

A bench led by Justice JB Paridawala agreed to consider a grant of stay on the show-cause notices after the gaming companies, facing thousands of crores in taxes, apprehended coercive action by authorities.

In April, the apex court had transferred 27 petitions to itself challenging the government's decision of 28 percent GST on all online gaming companies. The petitions were pending in nine high courts across the country.

The top court tagged the petitions with a pending case of Games Kraft case and appeals by the E-Gaming Federation, Play Games24x7 and others.

In September 2023, the Supreme Court upheld the judgment of the Karnataka High Court overturning the DGGI order imposing a Rs.21,000 crore GST demand on a Bengaluru-based online gaming platform.

The government had stated, "The cumulative tax effect in all these show-cause notices is Rs.91,684.81 crore vis-a-vis online gaming companies and Rs.1,08,505 crore, including casinos.".

The notices were issued after the government clarified that all online games involving betting and gambling, irrespective of skill or chance, attracted 28 percent GST on the full-face value of the bets from 01 October 2023.

It added that some firms leveraged the lack of clarity on taxation of games of chance and those of skill - the latter was liable to a lower rate before 01 October, and a uniform 28 percent GST on the full value of bets placed on the platforms was required.

The government also amended the GST law, making it mandatory for overseas online gaming companies to register in India from 01 October. Thus, the online gaming companies sought clarity as the government retrospectively imposed 28 percent GST on the ‘full value of the bets placed, and not on the gross gaming revenue.’

The companies complained that it would force them out of business.

They argued that the GST demands were raised on the 'buy-in' amount for each game and the proceeds. The reason given was that staking money in online games (skill or chance), meant betting and gambling.

The petitioners challenged the notices stating that the 'buy-in' constituted a transfer of goods as actionable claims. There was no supply of actionable claims by the online operator to players. Hence, the levy of GST was ‘unsustainable.’