The Supreme Court on Friday stayed ₹1.12 lakh crore worth of GST show cause notices issued to online gaming companies and casinos, offering temporary relief to the gaming industry.
The notices, issued by GST authorities, were based on retrospective tax claims levied on the full face value of bets placed on gaming platforms from August 2017 to October 2023.
The gaming companies have contested these claims, arguing that the tax should apply to gross gaming revenue (GGR)-the platform’s earnings after payouts to players-rather than the total bet amount.
A bench of Justices J.B. Pardiwala and M. Sundresh observed that the issue required careful consideration and ordered a stay on further proceedings against the companies. The matter has been scheduled for a detailed hearing on March 18, 2025.
The tax tussle originated from the decision of the GST Council in August 2023 to impose 28% tax on the full value of bets, which is a move that has been heavily opposed by the industry. Such taxation is considered financially unsustainable by companies and might lead to the closure of a few platforms.
By December 2023, GST authorities had issued 71 showcause notices to online gaming companies for tax evasion, amounting to ₹1.12 lakh crore. If penalties and interest were added, the total liability could soar to an estimated ₹2.3 lakh crore.
The government amended GST laws in October 2023, making overseas gaming platforms register in India. However, companies argue that applying the tax retrospectively is unjust and would stifle an industry with significant economic potential.
The online gaming sector has welcomed the Supreme Court’s decision. The EGaming Federation, which represents leading skill-based gaming operators, called it a “positive step” for the industry.
“This decision allows us the opportunity to present our case and highlights the importance of regulatory clarity for the growth of India’s digital economy,” the EGF said in a statement.
Saumya Singh Rathore, co-founder of WinZO Games, echoed similar sentiments, saying that a fair resolution was needed. “A progressive framework will not only bring clarity but also unlock significant potential for innovation, job creation, and investment in the sector,” Rathore said.
Despite the temporary relief, the industry faces considerable challenges. Many companies are absorbing GST costs to remain competitive, but this is unsustainable in the long term.
The retrospective tax demands have further strained operations, particularly as many games, such as rummy, continue to face legal ambiguity over whether they are based on skill or chance.
According to Abhishek Rastogi, founder of Rastogi Chambers and a legal counsel for gaming companies, “The case has far-reaching implications for the future of India’s online gaming industry. A balanced resolution will ensure clarity for both businesses and policymakers.
Tax experts have demanded fair and transparent architecture in handling the complexities of this fast-evolving sector. “This case might set a benchmark for digital taxation in India,” said Saurabh Agarwal, Tax Partner at EY.
While gaming companies are arguing for a tax structure that recognizes the uniqueness of their business, the revenue department is concerned about the losses it might incur. Additional Solicitor General N.V. Venkataraman argued that allowing the proceedings not to stop could adversely affect the government’s ability to collect taxes on time.
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