SC issues notice to the government regarding ₹1.5 lakh crore GST demand from online gaming firms

The Supreme Court has taken cognizance of a petition filed by online gaming companies challenging the hefty tax demands of approximately ₹1.5 lakh crore imposed by the government, specifically on a 28% Goods and Services Tax rate. However, the court refrained from issuing a stay order on the tax notices already issued.

Chief Justice D.Y. Chandrachud led a three-judge bench that has summoned responses from the Union government and the tax department within two weeks.

The legal action was initiated by the E-Gaming Federation, Play Games24x7, Head Digital Works, and other gaming startups contesting the retrospective GST claims.

The issue arose following the Directorate General of GST Intelligence’s move to serve notices to online gaming companies for the previous five fiscal years, amounting to nearly ₹1.5 trillion.

The contention revolves around the GST Council's August amendment specifying a 28% tax on online games involving bets, effective from October. Gaming firms argue that the tax should only apply post the amendment, while the government asserts that the revision merely clarified existing law, justifying its demand for retrospective tax dues.

Finance Minister Nirmala Sitharaman clarified in the Lok Sabha that the 28% tax on entry-level bets was prospective, with clear guidelines on its application and the exclusion of winnings.

Simultaneously, the GST Department has informed the apex court about its intent to consolidate all cases from various high courts related to this issue into the Supreme Court.

Earlier in September, the Supreme Court had stayed a Karnataka High Court ruling that quashed a GST notice on Bengaluru-based Gameskraft Technology, involving alleged tax evasion of ₹21,000 crore.

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