Supreme Court Shields Online Gaming Sector, Halts GST Notice in Landmark Move

New Delhi (The Uttam Hindu): In a significant relief for the online gaming sector, the Supreme Court on Friday stayed ₹1.12 lakh crore in Goods and Services Tax (GST) "show cause notices" issued to several gaming companies. The stay halts all proceedings related to the notices by the Directorate General of GST Intelligence (DGGI) until the case's final disposal.

The apex court has scheduled the final hearing for March 18. Following the decision shares of gaming companies like Delta Corp and Nazara Tech surged by up to 7% during intra-day trading.

Anurag Saxena, CEO of the E-Gaming Federation (EGF) welcomed the Supreme Court's decision calling it a positive step for both the government and the gaming industry. “This is a win-win for gaming operators who were facing coercive action and for the government which now has extended timelines. We are optimistic about a fair and progressive resolution that will unlock the sector’s potential for investment, employment and growth,” Saxena said.

The DGGI had issued 71 notices to gaming companies in 2023, accusing them of evading GST worth ₹1.12 lakh crore during 2022-23 and the first seven months of 2023-24. These notices issued under Section 74 of the GST Act, include provisions for penalties of up to 100% of the tax demand potentially increasing the total liability to over ₹2.3 lakh crore including interest.

In August 2023, the GST Council revised the tax law, imposing a 28% GST rate on the full value of bets placed in online games involving money regardless of whether they were based on skill or chance. The amended law took effect on October 1, 2023 and replaced the earlier practice of taxing only the gross gaming revenue.