India: SC to rule on impact of 28% GST on online gaming industry

The Supreme Court has directed the Centre and the GST department to file a reply to the plea within two weeks. The case is expected to be heard within months.

India.- The Supreme Court has initiated proceedings following pleas from online gaming entities, Head Digital Works and Games 24/7, contesting the government’s retroactive imposition of a 28 per cent Goods and Services Tax (GST) on the entire betting amount rather than the gross gaming revenue. 

According to Money Control, the court directed the Central government and GST department to respond within two weeks, with the case expected to be heard in a couple of months.

The GST department, in turn, is filing a transfer petition to consolidate all cases on this legal matter from various high courts into the Supreme Court.

Senior advocate Harish Salve represented the gaming companies, while Additional Solicitor General Venkatraman represented the GST department and the Union of India.

See also: Super Group withdraws from India due to online gambling tax

In an earlier case, the court on December 15 2023 dismissed an interim injunction against a GST requirement notice served on Head Digital Works and Games 24×7. The court, however, expressed its willingness to review the constitutional validity of the government’s decision to impose 28 per cent GST on the full value of bets from October 1.

The dispute centres on the applicability of a 28 per cent GST, opposed by gaming firms, compared to the previous 18 per cent until October 1, 2023. The government contends that the revised rate clarified an existing law and wasn’t retroactive. 

In August 2023, the GST Council modified the law, mandating a 28 per cent GST on the full value of bets for all online games involving wagers, regardless of skill or chance. 

Shortly after announcing the new tax, the Finance Ministry and Ministry of Electronics and Information Technology (MeiTy) said it would block non-compliant platforms.

Several online gaming companies have taken legal action against the retrospective imposition of 28 per cent GST on bets placed on their platforms. Other companies in the gaming and casino industry have also received show-cause notices for non-payment of 28 per cent GST on the full-face value of bets.