GST on online gaming companies: SC likely to hear pleas challenging 28% GST in July
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The Supreme Court on May 3 indicated that in July 2024 it would hear a batch of petitions challenging demand notices asking online gaming companies to pay  28 percent Goods and Services Tax (GST) on the full face value of bets.

A bench led by Chief Justice of India (CJI) DY Chandrachud said this while hearing a plea filed by Baazi Networks Private Limited , which owns Baazi Games, challenging notices issued to them.

During the course of the hearing, lawyers for the gaming companies argued that while the government has told the court that it would not act on notices, orders are likely to be passed in some case. Additional Solicitor General (ASG) Venkatraman, who appeared for the GST department, asked the lawyers to get in touch with him to sort this out.

The CJI, while indicating that the court will hear the plea after summer vacation and asked lawyer Charanya Lakshmikumara, who represents many of the gaming companies, to write an email in July 2024 to fix dates for hearing.

A batch of 30 petitions by online real money gaming companies challenging retrospective GST notices demanding payment of thousands of crores calculated at 28 percent on the face value of bets is currently pending before the Supreme Court.

In December 2023, the apex court refused to stay these notices, however it agreed to hear the plea.

These 30 petitions include 27 pleas transferred to the Supreme Court from various high courts, two original writ petitions filed by Head Digital and Play Games24x7, and finally, one appeal filed by the GST department challenging a Karnataka High Court verdict.

As of December 2023, these online gaming companies have been slapped with 71 showcause notices involving alleged evasion of GST of Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24 excluding interest and penalty. Since the notices were issued under section 74, which empowers the department to impose a penalty of up to 100 percent of the tax demand, it may take the amount to over Rs 2.3 lakh crore, including interest.

From October 1, 2023, 28 percent GST was imposed on the full face value of online gaming bets by the GST Council, which promised to review the levy after six months. The industry has been seeking to have the 28 percent GST calculated on the gross gaming revenue instead of the face value of bets.

However, the biggest blow to the gaming companies came when the GST Council imposed the tax retrospectively (from the past). Further, as per the Council’s interpretation of retrospectivity, all online games involving bets played between August 2017 and 1 October 2023, irrespective of skill or chance, needed to pay a GST rate of 28 percent on the full value of the bets placed, as it fell under the category of gambling.

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