NEW DELHI: In a major relief to online gaming companies, the Supreme Court (SC) on Friday put a stay on GST show-cause notices amounting to Rs 1.12 lakh crore against these companies. The court has suspended all further proceedings under these notices until the matter is conclusively adjudicated.
The court on Wednesday had agreed to hear the petition of these companies against GST department proceedings on notices served to them. The notices were issued against alleged tax evasion by these companies. However, the companies had moved courts against the notices disputing tax demand.
As per lawyer Abhishek Rastogi, this stay not only provides immediate respite to gaming companies from potential coercive action but also safeguards the interests of revenue authorities. “By pausing proceedings, the court ensures that the demands don’t become time-barred during the course of litigation, preserving scope for legal clarity without procedural hindrance,” says Rastogi, representing some of the gaming companies.
These firms had moved court pre-empting recovery actions by tax authorities based on the notices. They argued that such actions could impact their operations, given contentious nature of the GST demands.
“The court’s intervention addresses these apprehensions and ensures a fair hearing,” says Rastogi. The court has directed the consolidation of cases involving a batch of gaming companies, with the next hearing scheduled for March 18, 2025. As per tax experts, this provides a timeline for stakeholders to present their arguments and for the judiciary to evaluate core issues in this controversy.
Shares of gaming companies Delta Corp and Nazara Tech surged by up to 15%. Delta Corp shares closed with 4.4% gain while Narzara shares ended with a fall of 3.7%. The dispute arose over taxability prior to the October 2023 amendment, which clarified that 28% GST would be levied on the threshold deposit amount.
Before October 1, 2023, they were paying 18% on revenue they earned and not on deposits. They argue that GST should only be levied on their platform fees or commission, as many of these games involve skill rather than chance.