The Supreme Court of India on Friday stayed Goods and Services Tax (GST) proceedings against 49 online gaming companies over retrospective demand notices issued on the full face value of bets placed through their platforms. The bench, comprising Justices JB Pardiwala and R Mahadevan, granted the stay following the GST department’s request and scheduled the case for further hearing on 18 March 2025.
“This development underscores the evolving legal and policy landscape for online gaming in India, with the Supreme Court’s eventual ruling likely to shape the future of the industry,” said Abhishek A Rastogi, founder of Rastogi Chambers, who is representing the gaming companies before the Supreme Court.
Goods and Services Tax dispute
The tax controversy centres on show-cause notices issued by the GST department, demanding a total of ₹91,684 crore (USD 11 billion) from online gaming companies. Additionally, the government has included casinos in the dispute, raising the cumulative tax demand to ₹1,08,505 crore (USD 13 billion).
The Supreme Court intervened in a similar case involving Bengaluru-based gaming platform GamesKraft in September 2023. Here, the Karnataka High Court judgment which had reversed the ₹21,000 crore (USD 2.52 billion) GST demand of the Directorate General of GST Intelligence (DGGI).
Transition from 18% to 28% GST
Previously, online skill-based games were taxed at 18 percent GST. However, the GST Council, in a decision in July 2023, reclassified both skill-based and chance-based games under the 28 percent GST slab.
Effective from 1 October 2023, the government amended GST laws to impose a 28 percent tax on the full-face value of bets for all online gaming involving betting or gambling, irrespective of whether the games are skill-based or chance-based. The amendment also required overseas gaming platforms to register in India, addressing concerns over tax ambiguities and potential revenue losses.
GST show-cause notices reach ₹1.12 trillion
The GST row flared up in December 2023 when the Rajya Sabha exposed that 71 show-cause notices have been issued to online gaming firms for tax evasion. The notices comprised an alleged evasion of ₹1.12 trillion, or USD 13.7 billion, for the fiscal year 2022-23 and the first seven months of FY 2023-24.
According to the department, many online gaming platforms used the gaps in regulations before the amended rule came into force. According to officials, these changes are important to ensure the fair imposition of taxes and avoid any loss of revenues.
Consolidation of cases
The Supreme Court had earlier consolidated 27 petitions challenging the imposition of the 28 percent GST rate on online gaming companies. These cases, originally filed in nine high courts across India, were tagged with appeals by the E-Gaming Federation, Play Games24x7, and others.
On one hand, the government argues that this is an increase in tax compliance and revenue protection. The gaming industry, however, argues that a 28 percent GST rate on the full-face value of bets is exorbitant and threatens business sustainability.
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