Supreme Court adjourns to July 31 pleas against retrospective GST notices to RMG firms 

As of December 2023, real-money gaming companies have been slapped with 71 showcause notices involving alleged evasion of GST of Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24 excluding interest and penalty.

The Supreme Court has adjourned to July 31 petitions challenging retrospective goods and services tax (GST) notices to real-money gaming companies.

Thirty petitions have been filed by real-money gaming companies against the demand of more than Rs 1.5 lakh crore calculated at 28 percent on the face value of bets.

Chief Justice of India DY Chandrachud indicated on July 18 that the cases would be listed on July 31 only for further directions and would likely be heard on a subsequent date.

Of the 30, 27 pleas have been transferred to the top Court from various high courts. The original petition was filed by Head Digital, Play Games24x7 and Baazi Games, while one of the pleas by the GST department challenging a Karnataka High Court verdict.

Until December, real-money gaming companies were slapped with 71 show-cause notices for alleged evasion of GST of Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24 excluding interest and penalty.

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

On July 18, diversified gaming and sports media firm Nazara Technologies said that two of its subsidiaries — Openplay Technologies and Halaplay Technologies —were asked to pay nearly Rs 1,120 crore.

In August, 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.

Earlier, online gaming 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.

Recently, the tax authorities also sent retrospective tax notices to a string of skill-based gaming firms such as Dream Sports, Gameskraft, Games 24x7, Delta Corp's Deltatech Gaming, and Head Digital Works (A23).

All online games involving bets played between August 2017 and October 1, 2023, irrespective of skill or chance, need to pay a GST rate of 28 percent on the full value of the bets placed, as it fell under the category of gambling, the council said.

Courts have on several occasions said a game of skills can’t be taxed on par with a game of chance.

Games of skill are those that require skill to play and win. A game of chance does not require any skill to succeed, and hence, they are taxed at a higher rate. But the GST Council’s decision does make such distinction.

One June 22, it recommended an amendment to the Central Goods and Services Tax (CGST) Act, 2017, which would empower the government to discuss and overrule any retrospective demand sent by authorities.