In Short:
The Supreme Court has combined 27 petitions challenging the 28% GST on online gaming companies for a collective hearing. The case aims to clarify if online games are of skill or chance and if they fall under betting laws. Gaming companies argue against the retrospective tax claims, impacting the sector’s financial health. The government defends the GST revision as clarifying an existing law.
Supreme Court to Consolidate Pleas Challenging GST on Online Gaming Companies
In a recent development, the Supreme Court has decided to merge multiple pleas contesting the 28% GST on online gaming companies. This decision comes as a ray of hope for the gaming industry, which has been battling with tax implications.
Consolidation of Writ Petitions
During a hearing led by a three-judge bench headed by Chief Justice D.Y. Chandrachud, the Supreme Court directed the transfer of 27 writ petitions pending in various high courts across the country. These petitions will now be heard collectively along with a petition filed by **Gameskraft** and writs by **EGF** and **Play Games24x7**.
Government’s Response
The top court has also requested the Union government to submit counter affidavits in all writ petitions within three weeks. The consolidated case is scheduled for a hearing in the last week of April. This move aims to resolve the ongoing tax disputes in the online gaming sector and clarify the classification of these games as games of skill or chance.
Industry Stand
Several online gaming companies, including **Games 24×7** and **Head Digital Works**, have raised objections against the imposition of GST. They argue that the 28% tax should only apply from 1st October and the revised law should not have retrospective effects on their tax liabilities.
The Genesis of the Issue
The issue stemmed from the GST Council’s amendment in August, mandating a 28% tax on the “full face value” of bets or entry amounts in online games, effective from October 2023. The gaming companies contest that recurring playing amounts should not be subject to this tax.
In a previous hearing, senior advocate Harish Salve highlighted the disproportionate tax demands on gaming startups and urged the court to reconsider the classification of prize pools in online games.
Implications and Way Forward
The lack of a stay order against the GST body allows tax authorities to continue issuing demands on the online gaming sector. Industry experts believe that the upcoming hearings could provide clarity on the tax treatment of online gaming activities.
This development marks a significant milestone in the legal battle between the gaming companies and tax authorities, potentially shaping the future taxation framework for the online gaming industry.
