Supreme Court Halts ₹1.12 Lakh Crore GST Notices for Online Gaming Firms: A Landmark Decision!

On Friday, the Supreme Court issued a stay on the show-cause notices pertaining to goods and services tax against online gambling firms valued at Rs 1.12 lakh crore. The next hearing has been set for March 18, with an order that all subsequent procedures related to these notices will remain on hold until the issue is definitively resolved.

This decision is regarded favorably by both the revenue agency and online gambling businesses that had requested stays on this issue. For the revenue agency, this suspension ensures that the notices do not lapse, while for online gaming firms, it offers them an opportunity for an impartial hearing and safeguards against coercive measures.

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“The Supreme Court has instructed the merging of cases pertaining to a group of gaming companies, with the forthcoming hearing scheduled for March 18, 2025. This establishes a clear timeline for stakeholders to submit their arguments and for the judiciary to assess the fundamental issues in this critical taxation dispute,” stated Abhishek A. Rastogi, founder of Rastogi Chambers, who represents the gaming firms in the Supreme Court.

He emphasized that the result of this case is anticipated to have significant ramifications for the taxation framework surrounding the online gaming sector in India. “This development highlights the shifting legal and policy environment for online gaming in India, with the eventual ruling from the Supreme Court likely to influence the industry’s future,” he remarked.

The show-cause notices and associated cases center on the interpretation of GST’s applicability to online gaming. The government maintains that a 28% GST should be applied to the total contest entry fees, effectively taxing the entire prize pool. In this context, the GST council amended the legislation, applicable from October 1, 2023. However, gaming companies argue that GST should solely be imposed on their platform fees or commission, as many of these games rely on skill rather than luck. They assert that the GST Council’s amendment has a retrospective effect and that the law should only apply post-October 1, 2023.

Saurabh Agarwal, Tax Partner at EY, mentioned that the Supreme Court’s choice to pause proceedings on the show cause notices issued by the Directorate General of GST Intelligence (DGGI) constitutes a major event for the online gaming and casino sectors. “This action highlights the necessity of legal clarity and due process, particularly in industries that are undergoing rapid expansion and regulatory changes,” he added, noting that the upcoming conclusive hearing in March will be crucial in forming the regulatory environment and ensuring a just and transparent tax system for this sector.