NEW DELHI: The Supreme Court on Friday stayed goods and services tax (GST) proceedings against 49 online gaming companies over the retrospective demand notices issued to them, a decision that drove up the share price of some of the listed entities.
A bench comprising Justices JB Pardiwala and R Mahadevan passed the interim order and adjourned the matter for further hearing till March 18.
Market players saw the SC’s suspension as a relief to online gaming companies, which had received show-cause notices alleging GST evasion of Rs 1.1 lakh crore. Since the GST Act allows the government to impose a penalty of up to 100 per cent of the tax liability, the total liability could be Rs 2.3 lakh crore.
In October 2023, the GST Council imposed a 28% tax on the face value of online gaming bets, which the authorities interpreted as a clarification and increased the tax requirement for the period before the decision. Several online gaming companies have questioned the “retrospective” GST notices.
The gaming industry has been advocating for the tax to be calculated on gross gaming revenue (GGR) rather than the face value of bets. Before the decision, companies charged an 18% tax on platform fees, or GGR.
“While the GST resolution may take time, we remain optimistic that a fair resolution will not only provide much-needed clarity but also accelerate innovation, job creation and investor confidence. This clarity is crucial for many companies preparing to go public, positioning the Indian gaming ecosystem for the global leadership that India deserves. With the right policies in place, India is poised to seize this once-in-a-millennium opportunity to lead the global consumer technology landscape. “said Saumya Rathore, co-founder of Winzo, one of the petitioners along with entities such as Gameskraft, Games24x7. Several petitions pending in the High Courts have also been transferred to the apex court.
In September 2023, SC stayed a judgment of the Karnataka High Court, quashing a GST notification against Gameskraft for alleged evasion of Rs 21,000 crore. The powerful gaming lobby has been seeking to reverse the situation GST Council Decisionarguing that it will harm the industry. In October 2023, some states had asked for a review after six months, but the GST Council had not discussed the matter, amid figures showing that the gloomy picture painted by gaming companies was not true.
On a day when sensex fell 0.3% or 231 points, casino operator Delta Corp gained 4.9% to close at Rs 118.9. Similarly, OnMobile shares closed 0.6% stronger, while Nazara Tech, whose shares gained 8.5% after SC’s suspension, closed 3.3% lower.