Some online gaming industry leaders had knocked on the doors of the to challenge the 28 percent Goods and Services Tax (GST) imposed on iGaming firms, with particular concern over its retroactive application. Several gaming companies filed applications in December seeking a stay on tax collection pending the court’s final decision.
Based on local reports, the firms’ primary concern centres on the 28 percent GST assessment on entire betting pools, with companies arguing that retroactive tax obligations could potentially exceed their total revenue, threatening the sector’s viability. The tax controversy stems from regulatory changes in the South Asian country. While India’s GST framework was initially modified in 2018, a crucial amendment in 2023 specifically brought online money gaming under its scope. Since October 2023, gaming companies have been required to pay 28 percent GST on betting pools, but the tax department is now pursuing claims dating back to January 2018.
More than 30 companies challenge rule
The legal response has been substantial, with 30 petitions filed by real-money iGaming companies challenging the demand. Of these, 27 cases have been transferred from various high courts to the Supreme Court.
The initial petition was jointly filed by industry firms such as Head Digital Works, Games24x7, and Baazi Games, while the GST department separately challenged a High Court verdict. During recent proceedings, the GST Council indicated its intention to consolidate all related cases currently pending in various high courts.
India’s Supreme Court accepted the plea. This consolidation addresses fundamental questions about money gaming’s tax status, including whether such activities constitute games of skill or chance and their classification under betting and gambling for tax purposes.
Gov’t argues necessity
The scale of the issue became apparent during a hearing last year, where Additional Solicitor General N. Venkatraman, representing the GST department and Union of India, revealed that notices had been served to over 99 companies. Senior advocate Harish Salve appeared for the online money gaming companies, concerned over the industry-wide impact of this tax dispute.
Several lawyers highlighted in a joint article published in the the unprecedented attention the online gaming sector has received from policymakers, driven by its exponential revenue growth post-pandemic. However, they cautioned that amid this boom, the industry is grappling with daunting tax demands, which could amount to billions of dollars, posing a significant threat to its long-term viability.
India has historically opposed gambling and betting, leaving the regulation of these activities to individual states. Currently, betting is legal in the states of Goa, Daman, and Sikkim.
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