The Supreme Court on Monday (January 8) issued notice to the Centre and the GST department on pleas by e-gaming companies Head Digital Works and Games 24/7 challenging the government’s retrospective imposition of a 28% GST on the full value of bets placed, and not on the gross gaming revenue.
The apex court has directed both the Centre and GST department to reply to the plea in two weeks. The case is likely to be heard in a couple of months, Moneycontrol reported.
The GST department has also undertaken to file a petition seeking transfer of all cases about the same issue of law from various high courts to the SC. Senior advocate Harish Salve represented the online gaming companies and additional solicitor general Venkatraman represented the GST department and the Union of India.
In December last year, the Supreme Court refused to grant interim relief against GST demand notices to Games24x7 and Head Digital Works.
The court, however, indicated that it will 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 gross gaming revenue, from October 1.
This comes at a time when the online gaming space has been reeling under the impact of the recent GST changes, as per which a 28% tax would be levied on the full value of bets placed in online games, regardless of whether it involves games of skill or chance. The online gaming industry in India is currently facing a multitude of challenges.
In August 2023, the GST Council amended the law to clarify that all online games involving bets, irrespective of skill or chance, will attract a GST rate of 28% on the full value of the bets placed, and not on the gross gaming revenue.
In addition to ongoing concerns related to the GST in the real money gaming sector, online gaming companies have been served with huge tax demands. Online gaming companies have been served show-cause notices for alleged tax evasions to the tune of INR 1 lakh crore in 2023.
In light of the evolving tax and regulatory environment, several online gaming platforms have taken the step to temporarily suspend their operations. Platforms such as Quizzy, OWN, and Fantok have opted to halt their operations in response to these changing dynamics.
Meanwhile, amid regulatory challenges and taxation impacts faced by real money gaming (RMG) firms, funding in the gaming space declined significantly from $576 Mn in 2022 to $209 Mn in 2023 until November, Inc42 data showed.
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