SC Transfers All Pleas By Gaming Companies Challenging GST Demand Notices To Itself

The Supreme Court (SC) on Friday (April 5) reportedly transferred all pending cases challenging the notices issued to online gaming platforms for GST evasion and underpayment of taxes to itself.

As per Bar and Bench, the directive came in response to a petition filed by the Centre seeking the transfer of all 27 pleas to SC pending before nine high courts (HCs) across India. 

“Let reply be filed by April 27, 2024,” the bench comprising Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra said. The SC also reportedly issued directions to list the transferred pleas with the already pending petition filed by gaming major Gameskraft.

This comes three months after the SC, in January, issued notice to the Centre on a petition filed by gaming startups Head Digital Works and Games 24×7, challenging the GST notices.

The matter pertains to the bevy of notices issued to online gaming companies for evasion of GST post the implementation of GST Council’s decision to levy 28% tax on the industry. Right afterwards, multiple gaming companies, including Gameskraft, Dream11, Games 24×7, and Head Digital Works, filed cases before various HCs challenging the notices.

It is pertinent to note that the Centre promulgated new amendments last year which imposed a 28% tax levy on the full face value of online gaming, without making a distinction between games of skill and chance. 

Previously, these companies were taxed at the rate of 18% on gross gaming revenue (GGR) but the new rates increased the tax liabilities for online gaming platforms. 

Quick on the heels of the new amendments coming into effect, the Directorate General of Goods and Services Tax Intelligence (DGGI) issued notices totalling over INR 1.12 Lakh Cr to these online gaming companies. 

Last year, Minister of State (MoS) for finance, Pankaj Chaudhary, informed the Rajya Sabha that 71 show cause notices totalling INR 1.12 Lakh Cr were issued to online gaming companies for the financial year 2022-23 (FY23) and FY24 (up to October 2023).

Meanwhile, online gaming startups claimed that they were being taxed retrospectively and called for its revocation. On the other hand, the union government refuted the contention and said that online betting had always attracted 28% GST and that the tax notices were not retrospective in nature. 

As the liabilities mounted, Games24x7 and Head Digital Works moved the SC but the court, in December 2023, refused to grant interim relief to the two companies with regards to GST demand notices.

However, the SC indicated that it would 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 GGR.

Amid all this, some online gaming platforms (including Hike and MPL) undertook mass layoffs while many others shut down operations owing to the new mandates.