Gaming Giants Call on Supreme Court to Challenge Retroactive GST Claims

A minimum of two gaming firms have submitted ‘interlocutory applications’ in December to prevent the tax department from enforcing them until the Supreme Court steps in.

The Supreme Court is expected to hear the case this week.

The GST division is starting to issue adjudication notices to the gaming businesses that owe 28% tax on all betting incomes from previous years.

Gaming companies are reportedly requesting the Supreme Court’s intervention against retroactive GST demands, potentially resulting in substantial tax obligations that surpass their revenue.

According to ET, at least two gaming firms have submitted ‘interlocutory applications’ in December to prevent the tax office from enforcing them until the SC renders a conclusive ruling on the new 28% GST framework for online gaming companies, which was enacted in October 2023.

This comes at a juncture when the GST department is initiating the issuance of adjudication notices to the gaming firms that owe 28% tax on all betting amounts from previous years. This tax was applied to the money paid at the entry point for online gaming. At that time, the authorities stated that the measure aimed at regulating real money online gaming.

The Supreme Court is anticipated to discuss the issue this week.

While the authorities have gathered significant tax revenues in the initial six months of the new policy, numerous online gaming firms experienced a considerable decline in earnings. As indicated in a report published by EY and the US-India Strategic Partnership Forum (USISPF) in June of this year, over 50% of online gaming companies in India have encountered stagnant or diminishing revenues following the introduction of the new policy.

Moreover, major gaming firms such as Hike, MPL, and Spartan Poker also laid off a significant portion of their workforce after the new system was put into practice. Conversely, startups like Fantok and Quizy ceased their operations.

In contrast, Prime Minister Narendra Modi has proposed that the Indian online gaming industry be unshackled from regulations. Additionally, he urged the youth to elevate online games to global stages. during his Independence Day address.

“India has witnessed a surge in the evolution of its gaming market. However, I desire for the youth of the country to spearhead the gaming sector not only in playing but also in game development. Indian games should reach a global audience,” he articulated.

The GST revenue from India’s online gaming sector increased 412% to INR 6,909 Crore in the first six months (October 2023 to March 2024) of the new taxation framework, compared to INR 1,349 Crore in the April-September timeframe of 2023.