Relief from Rs. 500 Cr GST notice to Online gaming company Playerzpot by Bombay HC

The Bombay High Court on December 6 directed the adjudicating official of the Goods and Services Tax (GST) department not to issue any orders in a demand notice issued to online gaming company Playerzpot Media Private Limited without its approval.

“The adjudicating authority is entitled to hear the petitioners (Playerzpot) on the show cause notice (SCN), but final orders on the show cause notice shall not be delivered without the permission of this Court,” said a division bench of the Bombay High Court in its order.

In September 2023, Playerzpot received a demand notice from the GST department for more than Rs. 500 crore. The company sought relief from the Bombay High Court by filing a writ petition, which was heard on December 6.

During the hearing, lawyers for Playerzpot highlighted Delta Corp cases in Sikkim and the Goa bench of the Bombay High Court, where interim orders were issued, and requested the court do the same. As a result, the court issued an interim order to the adjudicating officer. Khaitan and Co., through its partners Sudipta Bhattacharjee and Onkar Sharma, represented Playerzpot.

So far this year, online gaming companies have been slapped with show-cause notices for alleged tax evasions of Rs. 1 lakh crore. These companies are arguing that they should pay 28% GST instead of 18% for the period ending October 1, 2023.

While companies assume that the 28% tax would be implemented only on October 1, the government believes that the October 1 modification has just clarified an already-existing law. In such a case, the government maintains that the demand for outstanding tax is not retrospective.

From October 1, 2023, the GST Council amended the law to make it clear that all online games involving bets, regardless of skill or chance, will attract a GST rate of 28% on the entire value of the bets placed, rather than the gross gaming revenue.

Currently, the Bombay High Court, the Bombay High Court’s Goa Bench, and the Sikkim High Court are hearing cases involving GST notices to gaming companies and casinos. Delta Corp., a big name in the gaming industry, said in an October filing on the stock market that the Goa bench of the Bombay High Court had looked into the writ petitions that the company and its subsidiaries had sent about the show cause notices that tax authorities had sent out and made an order telling the authorities they could not make any final decisions without first getting court approval. Similarly, the Sikkim High Court has stayed a Rs. 628 crore GST demand notice against Delta Corp.