'This is a win-win': Real-money gaming firms welcome Supreme Court's stay on GST show cause notices

Real-money games, where the transfer of money is involved, currently forms the bulk of revenues of India's overall gaming industry

Real-money gaming (RMG) companies and industry associations have welcomed the Supreme Court's decision to stay the goods and services tax (GST) show cause notices, worth more than Rs 1.5 lakh crore, issued by the revenue department against them.

"This is a win-win, both for gaming operators who were facing coercive action, and the government whose timelines may now be extended. We are confident about a fair and progressive resolution to this issue, after which we will see investments, employment, and valuations in the gaming sector grow to its full potential" said Anuraag Saxena, the chief executive officer of E-Gaming Federation (EGF), a skill gaming industry body.

EGF represents India's top online rummy and poker operators such as Games24x7, Head Digital Works, and Junglee Games.

WinZO Games co-founder Saumya Singh Rathore said while the GST resolution may take time, the company remains optimistic that a "fair resolution will not only provide the much-needed clarity but also accelerate innovation, job creation, and investor confidence".

"Regulatory clarity will be pivotal in fostering an environment where the industry can create over 5 decacorns and 10 unicorns within the coming 5 years, driving significant value for Indian markets and global investors," she said.

Read: How GST Council's 28% tax levy affects India's real-money gaming sector

Over 50 petitions have been filed by RMG companies including Gameskraft, Head Digital Works, Games24x7, Baazi Games, and WinZO and industry associations such as EGF and AIGF (All India Gaming Federation) challenging the retrospective demand tax notices of more than Rs 1.5 lakh crore, calculated at 28 percent on the face value of bets. These include several pleas that have been transferred to the apex court from various high courts.

In September 2023, the Supreme Court stayed a Karnataka High Court judgment, quashing a GST notice against Gameskraft for alleged tax evasion to the tune of Rs 21,000 crore, thereby paving the way for the GST department to initiate the process of sending show cause notices to these companies.

On January 10, a bench of Justices JB Pardiwala and R Mahadevan granted a stay on these notices until the final disposal of the cases. The matter is now listed for final hearing on March 18.

Also Read: SC ruling on Gameskraft GST case could decide fate of India's real-money gaming industry

At the heart of the dispute is the differing interpretation of how GST is levied on RMG platforms.

In August 2023, the GST Council decided to levy 28 percent GST on the full face value of player deposits, irrespective of whether it is a game of skill or chance, effective from October 1, 2023.

Earlier, RMG platforms paid 18 percent GST on the platform fees, also known as Gross Gaming Revenue (GGR). The platform fee is the commission operators charge players for allowing them to participate in a game on their platform. The industry argues that the sector should be taxed on GGR, since it represents the actual revenue earned by companies, instead of total deposits.

However, Sanjay Malhotra, then Revenue Secretary, mentioned in July 2023 that GST rates on RMG were always 28 percent on full face value and the amendment was only clarificatory in nature.

While the GST Council had agreed to review the decision six months after its implementation, no such review has taken place to date. There was no discussion of gaming-related issues in the latest GST meeting held in December 2024.

Read: GST collections from real-money gaming jump 412% to Rs 6,909 cr in 6 months under new tax rates, says FM Sitharaman

RMG, where the transfer of money is involved, currently forms the bulk of revenues of India's overall gaming industry that clocked $3.8 billion revenue in FY24, a 22.6 percent growth from $3.1 billion in FY23. The sector is expected to touch an estimated $9.2 billion by FY29.

Several industry executives have previously told Moneycontrol that any potential retrospective taxation dues, will make the overall operations unfeasible, likely leading many companies to wind down their businesses in the country.

(With inputs from Aryaman Gupta)