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The Supreme Court on Friday stayed show cause notices to over 50 online gaming companies amounting ₹1.12 lakh crore. At the same time, the Court ensured that these notices would not become time-barred during the litigation.
The next hearing is on March 18, and the apex court has directed the consolidation of all the cases.
The apex court has directed that all further proceedings under these notices remain suspended until the matter is conclusively adjudicated. According to Abhishek A Rastogi, founder of Rastogi Chambers, who is representing the gaming companies before the Supreme Court, this stay not only provides immediate respite to gaming companies from potential coercive action but also safeguards the interests of the Revenue authorities. By pausing the proceedings, the SC ensures that the demands do not become time-barred during the course of the litigation, preserving the scope for legal clarity without procedural hindrance.
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The online gaming sector had raised alarms about the possibility of aggressive recovery actions by tax authorities based on these notices. Companies argued that such actions could severely impact their operations, especially given the contentious nature of the GST demands. The SC’s intervention addresses these apprehensions and ensures a fair hearing.
At the heart of the dispute lies the interpretation of GST applicability on online gaming. The government contends that a 28 per cent GST should apply to the total contest entry amount, effectively taxing the entire prize pool. However, gaming companies argue that GST should only be levied on their platform fees or commissions, as many of these games involve skill rather than chance.
“The outcome of this case is expected to have far-reaching implications for the taxation framework of the online gaming industry in India. With the sector poised for rapid growth, clarity on tax treatment is crucial for fostering a predictable business environment and ensuring regulatory compliance. This development underscores the evolving legal and policy landscape for online gaming in India, with the SC’s eventual ruling likely to shape the future of the industry,” said Rastogi.
