Supreme Court Halts GST Actions Against Online Gaming Firms at Government’s Urging

On October 1, 2023, the GST Council established a 28% tax on the complete face value of online gaming bets. It pledged to reassess the tax after a period of six months. Nevertheless, the gaming industry has been advocating that the tax should be based on gross gaming revenue (GGR) instead of the face value of bets. GGR signifies the total amount wagered minus the winnings. Conversely, the full face value pertains to the overall bet amount or entry fee for contests. Gaming companies contend that taxing the full face value is unjust because users must pay 28% GST on every deposit made. This could render online gaming platforms more costly and less attainable for the general populace.

As of December 2023, online gaming firms have been issued 71 show-cause notices claiming GST evasion of  ₹1.12 lakh crore during the fiscal year 2022-23 and the initial seven months of 2023-24, excluding interests and fines. Because these notices were issued under Section 74 of the GST Act, which permits the department to impose a penalty of up to 100% of the tax claim, the overall liability may surpass ₹2.3 lakh crore, inclusive of interest.

More than 40 petitions from online real-money gaming firms contesting the retrospective GST notices are presently awaiting resolution before the Supreme Court. These notices demand payments amounting to thousands of crores, based on 28% of the total face value of bets.