Supreme Court Puts on Hold Rs. 1.1 Lakh GST Notices Issued for Online Gaming Companies

The Supreme Court has given temporary relief to the online gaming industry by holding GST proceedings against 49 gaming companies. These companies had received notices demanding past taxes, which they are now challenging. A bench comprising Justices J.B. Pardiwala and R. Mahadevan passed the order and scheduled the matter for further hearing on March 18.

The stay was seen as a welcome development for market participants since the gaming companies had been facing show-cause notices alleging GST evasion amounting to Rs. 1.1 lakh crore. Since the GST Act permits the government to charge penalties up to the level of 100% of the tax demand, the liability could have gone as high as Rs. 2.3 lakh crore.

A related development is that the Supreme Court, in September 2023, had stayed a Karnataka High Court judgment that quashed a Rs. 21,000 crore GST notice against one of the major gaming firms.

The gaming lobby continues to appeal for a reversal of the GST Council’s decision, warning that it would be disastrous for the industry. Even though some states had requested a review of the tax rate after six months, the GST Council has not revisited the matter, citing data that may have overstated the industry’s concerns.

Immediately, the market trend improved with the stay by the Supreme Court. Where the Sensex fell 0.3% or 231 points a day, shares of casino operator Delta Corp went up 4.9% to close at Rs. 118.9. OnMobile stocks closed 0.6% higher, while Nazara Technologies, which initially gained 8.5% following the SC order, ended the day 3.3% lower.

The online gaming industry remains optimistic that a just settlement of the tax dispute would bring much-needed clarity and would help the sector grow, contributing to India’s rise in the world consumer technology map.