The Supreme Court on Friday stayed show cause notices to 50 online gaming companies and casinos amounting to over ?1 lakh crore. The Court simultaneously ensured that these notices do not become time-barred during litigation.
The Court directed that all further proceedings under these notices remain suspended until the matter is conclusively adjudicated. A bench of Justices J B Pardiwala and R Mahadevan said the matters required hearing and all proceedings against the gaming companies should remain stayed in the meantime. Additional solicitor general N Venkataraman, representing the GST department, said some show cause notices would come to an end in February.
The next hearing is on March 18.
According to Abhishek A Rastogi, founder of Rastogi Chambers, who is representing the gaming companies before the Supreme Court, the outcome of this case will have far-reaching implications for taxation framework of online gaming industry in India. “With the sector poised for rapid growth, clarity on tax treatment is crucial for fostering a predictable business environment and ensuring regulatory compliance,” he said.
Terming Friday’s development as “temporary relief”, Sandeep Sehgal, Partner with AKM Global felt that the final ruling would be closely watched by the gaming industry as it could decide how ‘games of skill’ are treated differently from ‘games of chance’ under GST laws. “The ruling will impact the GST rate as well as the valuation which may greatly affect the costs for businesses and influence their future,” he said.
Anuraag Saxena, CEO of E-Gaming Federation (EGF) expressed confidence about a fair and progressive resolution to this issue. “We will see investments, employment, and valuations in the gaming sector grow to its full potential. With the recent dip in FII investments in the Indian equity market, we need more and more emerging sectors to bloom. Amicable and equitable resolutions like this form the basis for that confidence,” he said.
GST authorities in October 2023 issued show cause notices to online gaming companies for tax evasion. The government amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1, 2023 onward. In August, 2023, the GST council clarified 28 per cent GST would be levied on the full value of bets placed on online gaming platforms.
Gaming companies moved various high courts against such GST demands, contesting the claims of the revenue authorities. The top court last year allowed a petition of the Centre and transferred to itself pleas, challenging the imposition of 28 per cent GST on e-gaming firms, from nine high courts for an authoritative pronouncement.
Many online gaming firms like Games 24x7, Head Digital Works, Federation of Indian Fantasy Sports had moved the top court challenging the GST imposition. The top court had stayed the Karnataka High Court verdict quashing the GST intimation notice to the tune of Rs 21,000 crore issued to an online gaming firm.
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