Date: 17.01.2024

by Antoni Majewski

Supreme Court to Examine GST Imposition on Online Gaming Companies

The Supreme Court of India has agreed to examine the challenge posed by a group of online gaming companies against the recent imposition of a 28% Goods and Services Tax (GST) on the full face value of online gaming transactions. This decision reflects the court’s intent to address potential inconsistencies in the taxation of the burgeoning online gaming sector.

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Notice Issued by Supreme Court

A bench led by Chief Justice of India Dhananjaya Y Chandrachud issued notices to the Union government and the director general of the GST Intelligence, acknowledging the necessity of the top court’s consideration in this matter. The case is set to be heard after four weeks.

The bench, which includes justices JB Pardiwala and Manoj Misra, noted the importance of an authoritative decision, given the possibility of contradictory judgments by different high courts currently addressing the same issue. The court aims to avoid disparate views and bring uniformity to this significant legal question.

Arguments Presented

Senior advocate Harish Salve, representing the petitioners, argued against the classification of online gaming under ‘actionable claim’, which is considered goods under the Central Goods and Services Tax Act, 2017. Additional Solicitor General N Venkataraman, representing the Centre, agreed with the court’s view but highlighted the GST Council’s decision to impose the tax on a trial basis.

In July 2023, the GST Council decided to levy a 28% GST on the full value of bets in online gaming, rather than on gross gaming revenue. This amendment led to significant tax demands on online gaming companies, with allegations of tax evasion amounting to ₹1 lakh crore in 2023 alone.

Union Finance Minister’s Stance

Union Finance Minister Nirmala Sitharaman, head of the GST Council, emphasized that the decision was not aimed at ending the industry but raised a moral question about equating the taxation of gaming with other essential items.

The Supreme Court’s decision to examine the GST imposition on online gaming companies marks a crucial juncture in the regulation of India’s rapidly growing online gaming industry. The outcome of this case could have significant implications for the sector, potentially influencing its operational dynamics and financial structure.

Our Comment on the Article

The Supreme Court’s intervention in the GST issue for online gaming companies is a critical development in understanding and defining the tax framework for this sector. Balancing the government’s tax objectives with the industry’s growth prospects is key. This case underscores the need for clear and consistent tax policies that reflect the unique nature of online gaming, ensuring fair taxation while fostering the industry’s development.