Gaming Companies Seek SC Intervention Against Retrospective GST Demands

SUMMARY

At least two gaming companies have filed ‘interlocutory applications’ in December to restrict the tax office from compelling them Until SC intervenes

The Apex court is likely to hear the matter this week

The GST department is beginning to file adjudication notices to the gaming companies which owe 28% tax on the entire betting money for past years

Gaming companies are reportedly seeking the Supreme Court’s intervention against retroactive GST demands, which could lead to hefty tax burdens exceeding their earnings.

As per ET, at least two gaming companies have filed ‘interlocutory applications’ in December to restrict the tax office from compelling them till SC gives a final verdict in the new 28% GST regime for online gaming companies, which was implemented in October 2023.

This comes at a time when the GST department is beginning to file adjudication notices to the gaming companies which owe 28% tax on the entire betting money for past years. This tax was imposed on the amount being paid at the entry level for online gaming. Back then, the authorities said that the decision was aimed at regulating online real money gaming.

The Apex court is likely to hear the matter this week.

While the authorities have collected heavy amounts of taxes in the first 6 months of the new regime, several online gaming companies saw a major revenue hit. As per a report released by EY and US-India Strategic Partnership Forum (USISPF) in June this year, more than 50% online gaming companies in India witnessed stagnant or declining revenues after the new regime came into effect.

Not just this, gaming majors like Hike, MPL and Spartan Porker also let go a large chunk of their employees after the new regime was implemented. On the other hand, startups like Fantok and Quizy shut down their operations.

On the contrary, Prime Minister Narendra Modi suggested the Indian online gaming space to be free from the regulations. Also, he encouraged the youth to take online games to international platforms. during his Independence Day Speech

“India has seen a boom in the development of its gaming market. However, I want the country’s youth to lead the gaming industry not just in playing but also in producing games. Indian games must reach the world,” he said.

The GST collection from India’s online gaming industry surged 412% to INR 6,909 Cr in the first six months (October 2023 to March 2024) of the new tax regime, against INR 1,349 Cr in April-September period of 2023.