Online gambling enterprises and casinos were temporarily granted reprieve from GST show cause letters valued at ₹1.12 lakh crore on Friday when the Supreme Court halted their execution.
The notifications were sent out by representatives of the Goods and Services Tax (GST) department in response to requests for back taxes on the total amount wagered on gambling platforms between August 2017 and October 2023.
The gambling businesses argue that the tax should be applied to gross gaming revenue (GGR), which is the platform’s revenues after payments to players, and not to the whole bet amount. They have opposed these allegations.
Justices J.B. Pardiwala and M. Sundresh, sitting as a bench, halted any further actions against the businesses after noting that the matter needed further examination. A thorough hearing has been set for March 18, 2025, about this topic.
Online Gaming Platforms Receive GST Notifications
The sector has been strongly opposed to the GST Council’s proposal to apply a 28% tax on the whole value of bets in August 2023, which is where the tax dispute began. Companies see such taxes as financially unsustainable, which might cause some platforms to close.
Online gaming enterprises were hit with 71 showcause warnings for tax evasion, totaling ₹1.12 lakh crore, by December 2023, according to the GST officials. Adding fines and interest might increase the overall liabilities to almost ₹2.3 lakh crore.
To require international gaming sites to register in India, the government revised GST legislation in October 2023. But businesses say it’s unfair to apply the tax retroactively and would hurt a promising sector of the economy.
The Online Gaming Industry Applauds the Supreme Court’s Ruling
The ruling by the Supreme Court has been well-received by the online gambling market. The top operators in skill-based gambling were represented by the EGaming Federation, who hailed it as a “positive step” for the sector.
“This decision gives us a chance to make our case and shows how crucial it is to have clear regulations so India’s digital economy can grow,” the EGF stated.
In a similar vein, WinZO Games co-founder Saumya Singh Rathore stated that a just settlement was required. Rathore stated that a progressive framework would be beneficial since it would offer clarity and open up many opportunities for innovation, job growth, and investment in the industry.
How Difficult Are Things?
The sector still has a long way to go before it can relax, though. To stay competitive, many firms are absorbing GST charges, but this won’t work in the long run.
Operations have been further burdened by the retrospective tax demands, which is especially concerning considering the ongoing legal uncertainty surrounding the question of whether games like rummy are based on skill or chance.
“The case has far-reaching implications for the future of India’s online gaming industry,” says Abhishek Rastogi, founder of Rastogi Chambers and legal counsel for gaming firms. Businesses and lawmakers alike will benefit from a well-rounded resolution that clarifies everything.
With the complexity of this rapidly developing industry comes the need for fair and transparent architecture, according to tax specialists. Digital taxes in India could be defined by this case, according to EY Tax Partner Saurabh Agarwal.
The gambling industry is asking for a tax system that takes into account the special nature of their operation, while the government agency in charge of collecting taxes is worried about the potential losses. The argument put out by Additional Solicitor General N.V. Venkataraman was that the government’s capacity to collect taxes on time may be compromised if the proceedings were not halted.
