The Supreme Court on Friday stayed show-cause notices for goods and services tax on online gaming companies worth Rs 1.12 lakh crore. It has scheduled the next hearing on the matter for March 18 and has directed that all further proceedings under these notices shall remain suspended until the matter is conclusively adjudicated.
The move is being seen as a positive for both the revenue department and online gaming companies that had both sought stays on the matter. For the revenue department, the stay means that the notices do not get time-barred, while for online gaming companies, it means that they have the chance for a fair hearing and protection from coercive action.
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“The SC has directed the consolidation of cases involving a batch of gaming companies, with the next hearing scheduled for March 18, 2025. This provides a defined timeline for stakeholders to present their arguments and for the judiciary to evaluate the core issues in this high-stakes taxation controversy,” said Abhishek A. Rastogi, founder of Rastogi Chambers, who is representing the gaming companies before the Supreme Court.
He noted that the outcome of this case is expected to have far-reaching implications for the taxation framework of the online gaming industry in India. “This development underscores the evolving legal and policy landscape for online gaming in India, with the Supreme Court’s eventual ruling likely to shape the future of the industry,” he said.
The show-cause notices and the cases revolve around the interpretation of applicability of GST on online gaming. The government is of the view that 28% GST should apply to the total contest entry amount, effectively taxing the entire prize pool. To this effect, the GST council had amended the law, effective October 1, 2023. However, gaming companies argue that GST should only be levied on their platform fees or commission, as many of these games involve skill rather than chance. They contend that the amendment by the GST Council is retrospective in nature and the law should be applicable only after October 1, 2023.
Saurabh Agarwal, Tax Partner, EY said the Supreme Court’s decision to stay proceedings on show cause notices issued by the Directorate General of GST Intelligence (DGGI) marks a significant development for the online gaming and casino industries. “This move underscores the importance of legal clarity and due process, especially in sectors experiencing rapid growth and regulatory evolution,” he said, adding that the upcoming final hearing in March will be pivotal in shaping the regulatory landscape and ensuring a fair and transparent taxation regime for this sector.