Online gaming firms move SC to review 28% GST ruling
What's the story
A group of online gaming companies has petitioned the Supreme Court, seeking a review of its May 27 judgment. The ruling had upheld the constitutional validity of a 28% Goods and Services Tax (GST) on online gaming. It also rejected challenges to retrospective tax demands exceeding ₹1.5 trillion. The petitions were filed by Play Games24x7, Junglee Games, and Sachiko Gaming Pvt Ltd through law firm Lakshmikumaran & Sridharan.
Legal challenge
Key challenges in review petitions
The review petitions challenge the Supreme Court's stance that online gaming, fantasy sports, and other real-money games with pooled stakes are taxable actionable claims under the GST law.
The court had also ruled that online gaming operators aren't just intermediaries but suppliers of actionable claims.
This was part of a broader ruling which upheld the government's decision to levy 28% GST on the full face value of bets placed on online gaming platforms.
Tax validation
Validation of retrospective tax demands
The SC's ruling also validated retrospective tax demands issued by the Directorate General of GST Intelligence (DGGI), amounting to over ₹1.5 trillion.
The court ruled that GST is payable on the full face value of bets or entry amounts and not just on platform fees or gross gaming revenue.
This was a major blow for the online gaming industry, which had challenged these demands in various high courts before they were transferred to the Supreme Court.
Industry impact
Industry's response to the Supreme Court ruling
In response to the Supreme Court's ruling, several gaming companies including Games24x7, Head Digital Works, Baazi Networks, and the E-Gaming Federation challenged these demands.
They argued that the 28% GST on full face value should apply only from October 1, 2023, after amendments approved by the GST Council came into force.
The industry contended that these amendments introduced a new tax regime which could not be applied retrospectively.
Future prospects
Implications of the review petitions
The review petitions come as a last-ditch effort by the companies to get the SC to reconsider its ruling.
The court will first determine if there are sufficient grounds for review. If accepted, it will hear the matter in open court.
The outcome of these petitions could have major implications for India's online gaming industry, which has argued that the tax burden and retrospective claims threaten business viability in the sector.