SUMMARY
The court, however, indicated that it will consider a case on constitutional validity of the government's decision to impose 28% GST on online gaming companies retrospectively on the full value of the bets placed, and not on the gross gaming revenue, from October 1
With the recent GST changes, the online gaming industry is facing challenges as a 28% tax is now applicable to the total value of bets, irrespective of whether they involve skill or chance
Due to changing tax and regulatory conditions, platforms like Quizzy, OWN, and Fantok have temporarily suspended operations
The Supreme Court has refused to grant an interim relief against Goods and Services Tax (GST) demand notices to e-gaming companies games24x7
and Head Digital Works.
As per Monecontrol’s report, the court, however, indicated that it will consider a case on the constitutional validity of the government’s decision to impose 28% GST on online gaming companies retrospectively on the full value of the bets placed, and not on the gross gaming revenue, from October 1.
Harish Salve, senior advocate for online gaming companies, urged the court to direct the government not to take action on the demand notices until the Supreme Court reviews the case. He informed the court about the constant probes by the GST department, putting pressure on the companies.
Salve told the court that while they are providing the requisite details, any adverse order will put these companies under further pressure.
Additional Solicitor General (ASG) Venkatraman, representing the government, requested a deferral of the case hearing, citing a lack of proper instructions. Consequently, the court postponed the hearing to January 8.
This comes at a time when the online gaming space has been reeling under the impact of the recent GST changes, as per which a 28% tax would be levied on the full value of bets placed in online games, regardless of whether it involves games of skill or chance.
The online gaming industry in India is currently facing a multitude of challenges. In addition to ongoing concerns related to the Goods and Services Tax (GST) in the real money gaming sector, online gaming companies have reportedly received show-cause notices for suspected tax evasion amounting to a significant sum of INR 1 Lakh Cr.
In light of the evolving tax and regulatory environment, several online gaming platforms have taken the step to temporarily suspend their operations. Platforms such as Quizzy, OWN, and Fantok have opted to halt their operations in response to these changing dynamics.
Meanwhile, Bengaluru-based Gameskraft made a similar strategic decision by shelving its fantasy gaming offering, Gamezy Fantasy, in September.
Earlier, the parent entity of Games24x7 also received a notice amounting to INR 21,000 Cr from tax authorities.
It is pertinent to note that besides facing financial and other troubles after the implementation of the new GST regime for real money gaming in October, online gaming firms have also been receiving show-cause notices from the tax authorities for alleged GST evasion.
Further, the Indian government is thinking about creating a Group of Ministers (GoM) to set up rules for the online gaming industry and address related issues.
