Highlights
Supreme Court of India Issues Stay on GST Show-Cause Notices for Online Gaming Companies
On Friday, the Supreme Court of India granted a stay on the issuance of GST (Goods and Services Tax) show-cause notices directed at various online gaming companies. This legal decision offers temporary relief to the online gaming sector, which has been facing heightened scrutiny from tax authorities.
The ruling was delivered by a bench led by Justice JB Pardiwala, just ahead of the Supreme Court’s final hearing on the matter scheduled for March 18.
Impact of the GST Show-Cause Notices
The GST show-cause notices were issued due to allegations of tax evasion, which have stirred concern among investors and stakeholders within the industry. This judicial decision is anticipated to ease some of the immediate financial pressures and regulatory uncertainties impacting the online gaming sector.
- The Directorate General of GST Intelligence (DGGI) has issued 71 notices to various gaming companies, accusing them of evading GST amounting to Rs 1.12 lakh crore during the financial year 2022-23 and the first seven months of 2023-24, excluding any interest and penalties.
- Since these notices were issued under Section 74 of the GST Act, which permits the department to impose a penalty up to 100% of the tax due, the total liability could surpass Rs 2.3 lakh crore, including interest.
Previous GST Council Decisions
In July 2023, the 50th GST Council made the decision to implement a 28% GST on the full face value of online gaming, effective from October 1, 2023. This ruling led to a series of shutdowns and job cuts within various startups in the gaming sector.
Industry Response
Over 100 Indian entrepreneurs, CEOs, and industry associations involved in real-money gaming have reached out to the Indian government, requesting a reevaluation of this decision.
Prominent gaming companies, including Gameskraft, Dream11, Probo, and MPL, have also received show-cause notices, with some opting to contest the retrospective tax in the Supreme Court. Nevertheless, the apex court has transferred 27 writ petitions currently pending in 11 high courts across the nation.