Online Gaming Companies and GST
Online gaming companies have challenged the retrospective application of the 28% Goods and Services Tax (GST) in the Supreme Court. They argue that the government's categorization of online gaming as 'gambling' for tax purposes contradicts decades of legal precedent.
Distinction Between Games of Skill and Chance
- Senior counsel, on behalf of Gaming company, stated that games requiring substantial skill are not equivalent to betting and gambling.
- He emphasized that there is no supply of actionable claims by the operator to players, making the GST levy unsustainable.
- The Supreme Court has consistently distinguished 'games of skill' from 'games of chance'.
Role of Online Gaming Platforms
- The gaming company argued that their platform merely facilitates games and does not participate in gameplay or determine stakes.
- The platform acts as an intermediary, with no stake or interest in the prize money.
GST Demand and Court Proceedings
- In September 2023, the Supreme Court stayed a Karnataka High Court judgment that overturned a GST demand of ₹21,000 crore.
- Senior counsel, representing gaming firms, stated the industry opposes retrospective GST application but not prospective taxation on full bet values.
Government's Stance and Legal Actions
- The Directorate General of GST Intelligence (DGGI) considers online gaming as gambling, taxing stakes at the highest rate.
- The Supreme Court is reviewing petitions concerning ₹1.12 lakh crore show-cause notices issued by DGGI to 71 online gaming companies and casinos.
Taxation Clarity and Amendments
- The government clarified all betting and gambling games will attract 28% GST from October 1, 2023.
- Cumulative tax implications for online gaming companies are estimated at ₹91,684.81 crore.
- In August 2023, the GST law was amended to require overseas gaming companies to register in India.
