Supreme Court Consolidates Multiple Pleas Challenging 28% GST on Online Gaming Companies
Supreme Court Consolidates Multiple Pleas Challenging 28% GST on Online Gaming Companies
Exploring the Supreme Court's review of appeals against the 28% GST imposed on online gaming companies. Key insights into the legal challenge.
The Supreme Court has taken a significant step towards resolving the ongoing dispute over the imposition of a 28% Goods and Services Tax (GST) on online gaming companies. In a hearing led by a three-judge bench headed by Chief Justice D.Y. Chandrachud on Friday, the apex court ordered the consolidation of 27 writ petitions pending in 11 high courts across the country, to be heard together.
Consolidated Case to Provide Clarity on Online Gaming Taxation
The consolidated case, which includes petitions filed by Gameskraft, EGF, and Play Games24x7, is scheduled to be heard during the last week of April. The Union government has been asked to file counter affidavits in all writ petitions within three weeks. The final hearing in this matter is expected to end the prolonged tax overhang on the online gaming sector and clarify conclusively whether these games are considered games of skill or chance and if they fall under the ambit of betting and gambling.
Several online gaming companies, including Games 24×7 and Head Digital Works, have filed writ petitions with the Supreme Court contesting the imposition of GST. The issue originated in August when the GST Council amended the law to enforce a 28% tax on the “full face value” of bets or entry amounts in online games, effective from October 2023.
The gaming companies argue that the 28% tax should be applicable only from October 1, while the government contends that the revision clarified existing law, and thus, its demand for tax dues is not retrospective. The companies also insist that recurring playing amounts should not come under actionable claims of tax.
Gaming Industry Raises Concerns Over Potential Bankruptcy
During a previous hearing, senior advocate Harish Salve, representing the gaming industry, objected to categorizing the prize pools as an ‘actionable claim.’ He contended that since the games are played between players, with the companies merely drawing a platform fee, actionable claims should not factor into the GST demand, as the platforms and services only function as intermediaries.
Salve emphasized that the tax claims on online gaming startups were multiple times higher than the companies’ reported net revenues in the previous five financial years, which could potentially push the nascent sector toward bankruptcy.
The online gaming industry has been grappling with ambiguities in taxation, with divergent rulings from various judicial forums across the country. The exponential growth in revenue generation since the pandemic has only heightened the need for a clear and consistent taxation policy.
Supreme Court's Decision to Provide Much-Needed Clarity
Related posts
