The Supreme Court has issued a final warning to the Central Government regarding its response to petitions challenging the imposition of a 28 percent Goods and Services Tax (GST) on online gaming companies. The court has instructed the government to submit its reply by May 15, expressing concern over the delay in filing the response. It emphasized that the government should have filed its reply by April 22. The Supreme Court is set to reconvene on this matter in July.
The petitions challenging the GST imposition were filed by the E-Gaming Federation, which contests the government’s decision to levy a 28 percent tax on online gaming activities. In a previous hearing, Chief Justice of India (CJI) had consolidated all 27 petitions pending in nine different High Courts into the Supreme Court.
Several online game entities, including Gamescraft, Dream 11, Games 24×7, and Head Digital Works, have approached the Supreme Court to contest the GST imposition. These companies collectively received a GST notice amounting to Rs. 1.5 lakh crore. During previous proceedings, the Supreme Court had sought clarification from the companies.
The online gaming companies have argued that the new GST rate should only be applicable from October 1, 2023. Conversely, the government maintains that the 28 percent GST on online gaming is not a novel imposition, as it already existed. Therefore, companies are liable to pay outstanding dues accumulated under the previous GST rate.
It is noteworthy that during a GST Council meeting last year, it was announced to impose a 28 percent GST on casinos, online gaming, and horse racing, marking an increase from the previous 18 percent rate applicable to online gaming, casinos, and horse racing activities.
The ongoing legal battle underscores the contentious issue surrounding the taxation of online gaming activities and the financial implications for both the government and the gaming industry. With the Supreme Court’s directive for the Central Government to expedite its response, the outcome of this case will significantly impact the future regulatory landscape governing online gaming taxation in India.
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