The Supreme Court has stayed GST proceedings against 49 online gaming companies concerning retrospective tax demands on the full face value of bets placed through their platforms.
The GST Council had imposed a 28% tax on the full face value of bets starting October 1, 2023, with retrospective application from August 2017. The gaming industry argued this tax was unjust, advocating for it to be levied on gross gaming revenue (GGR) instead.
The gaming companies have challenged the tax demands totaling ₹1.12 lakh crore, excluding penalties and interest, which could push total liabilities above ₹2.3 lakh crore under Section 74 of the GST Act.
The controversy gained prominence with the Gameskraft case, where the GST department issued a record ₹21,000 crore notice, claiming the company promoted betting through online card games like Rummy Culture. The Karnataka High Court ruled in favor of Gameskraft, stating Rummy is a game of skill and not taxable as gambling. The GST department appealed this decision to the Supreme Court, which stayed the High Court’s ruling to prevent setting a precedent.
This stay provides temporary relief to the online gaming industry, but its implications are significant. A ruling in favor of the gaming companies could shift India’s GST policy to tax GGR instead of full bets, offering clarity and reducing operational uncertainties. Conversely, upholding the retrospective tax could impose a substantial financial burden on the sector, affecting its sustainability.
The matter was heard by Justices JB Pardiwala and R Mahadevan, who listed it for further hearing on March 18, 2024.
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