GST: Supreme Court to Start Hearing on Retrospective Online Gaming Tax From May 5

The Supreme Court stated that from May 5, it will hear the appeals by online gaming firms against the 28% GST on all forms of online real-money gaming.

The case was taken up by a bench led by Justice JB Pardiwala, which was ready to begin, but the parties said they would need 4–5 days to present arguments.

Earlier, the court had directed the Centre and GST department to file their response to the companies’ pleas. Notices were issued to the government on petitions filed by firms like Head Digital Works, Games24x7, and Dream11, who are opposing the tax being applied to the total value of bets instead of just their earnings. The GST department has also requested that all similar cases from different high courts be moved to the Supreme Court.

Background

Senior advocate Harish Salve represented the online gaming companies, while the GST department and the Union of India were represented by Additional Solicitor General Venkatraman.

In 2023, the GST Council decided to levy a flat 28% tax on the total value for online gaming, casinos, and horse racing. To enforce this, changes were made to the GST laws during the monsoon session, and the new rule was effective from October 1, 2023. The changes provided that GST will be imposed on entry-level bets on online gaming platforms and not on what players pay in each game from the winning amount.

Earlier, on December 15, 2023, the apex Court refused to grant temporary relief to gaming companies against the GST demand notices that were already issued.

The court stated that it would look into whether the government was right in applying 28% GST on the full value of bets placed instead of just the gross gaming revenue earned by companies and whether this tax could be applied retrospectively.

Online gaming companies argued that the 28% GST would be applicable only from October 1, 2023. But the government said that the October 1 change was just to clarify an existing law and that the tax demand for taxes is not backdated.

In September 2023, the Supreme Court put a hold on the Karnataka High Court’s decision that had cancelled a massive Rs 21,000 crore GST demand against Bengaluru-based gaming firm Gameskraft.

Earlier, on May 11, the Karnataka High Court quashed the Rs. 20,989 crore show-cause notice issued to Gameskraft for alleged GST evasion.
The GST department accused Gameskraft of allowing users to place money bets on online games and said the company was promoting online betting through games like Rummyculture, Gamezy, and Rummytime.

As a result, the authorities had put a 28% GST on games of betting, gambling, and chance on a total betting amount of around Rs 77,000 crore.