NEW DELHI: In a major relief to online gaming companies, the Supreme Court (SC) has stayed the GST show-cause notices amounting to Rs 1.12 lakh crore against these companies. The apex court has also directed that all further proceedings under these notices shall remain suspended until the matter is conclusively adjudicated.
The SC on Wednesday agreed to hear the petition of online gaming companies against GST department proceedings on the show-case notices served to these companies.
According to lawyer Abhishek Rastogi, this stay not only provides immediate respite to gaming companies from potential coercive action but also safeguards the interests of the Revenue authorities. "By pausing the proceedings, the SC ensures that the demands do not become time-barred during the litigation, preserving the scope for legal clarity without procedural hindrance," says Rastogi, who is representing some of the gaming companies.
It must be noted that the online gaming sector had raised alarms about the possibility of aggressive recovery actions by tax authorities based on these notices. Companies argued that such actions could severely impact their operations, especially given the contentious nature of the GST demands. The SC’s intervention addresses these apprehensions and ensures a fair hearing.
The SC has directed the consolidation of cases involving a batch of gaming companies, with the next hearing scheduled for March 18, 2025. This provides a defined timeline for stakeholders to present their arguments and for the judiciary to evaluate the core issues in this high-stakes taxation controversy.
The litigation stems from the applicability of GST rate on online gaming. The government contends that a 28% GST should apply to the total contest entry amount, effectively taxing the entire prize pool. However, gaming companies argue that GST should only be levied on their platform fees or commissions, as many of these games involve skill rather than chance.