Supreme Court Halts GST Actions Targeting Online Gaming Firms

NEW DELHI: In a significant relief for online gaming enterprises, the Supreme Court (SC) has halted the GST show-cause notices totaling Rs 1.12 lakh crore targeted at these firms. The highest court has also mandated that all subsequent proceedings concerning these notices will remain on hold until the matter is thoroughly adjudicated.

On Wednesday, the SC agreed to examine the petition submitted by online gaming firms regarding the GST department’s actions on the show-cause notices issued to them.

According to attorney Abhishek Rastogi, this stay not only offers immediate relief to gaming companies from potential coercive measures but also protects the interests of the Revenue authorities. “By suspending the proceedings, the SC guarantees that the demands do not lapse during the litigation, maintaining the possibility for legal clarity without procedural obstruction,” states Rastogi, who represents several of the gaming companies.

It is important to highlight that the online gaming industry had expressed concerns regarding the potential for aggressive recovery actions by tax authorities based on these notices. Companies contended that such measures could severely disrupt their operations, particularly given the contentious nature of the GST demands. The SC’s involvement addresses these concerns and guarantees a just hearing.

The SC has instructed the consolidation of cases involving a group of gaming companies, with the next hearing set for March 18, 2025. This establishes a clear timeline for stakeholders to present their cases and for the judiciary to deliberate on the central issues in this significant taxation dispute.

The litigation arises from the question of GST applicability on online gaming. The government asserts that a 28% GST should be imposed on the total contest entry fees, effectively taxing the entire prize pool. In contrast, gaming firms argue that GST should only be charged on their platform fees or commissions, as many of these games entail skill rather than luck.