Supreme Court stays GST notices, relief for gaming sector

The Supreme Court of India on Friday granted a stay on the GST (Goods and Services Tax) show-cause notices issued to several online gaming companies. This legal development has provided temporary relief to the online gaming sector, which has been under increasing scrutiny from tax authorities.

The ruling, issued by a bench led by Justice JB Pardiwala, precedes the Supreme Court's final hearing on the case, set for March 18.

The GST show-cause notices were issued in relation to allegations of tax evasion, which had caused concern among investors and industry stakeholders. This decision is expected to alleviate some of the immediate financial pressures and regulatory uncertainties faced by the online gaming industry.

The DGGI has sent 71 notices to gaming companies, accusing them of evading GST worth Rs 1.12 lakh crore during 2022-23 and the first seven months of 2023-24, excluding interest and penalties. Since these notices were issued under Section 74 of the GST Act, which allows the department to impose a penalty of up to 100% of the tax demand, the total liability could exceed Rs 2.3 lakh crore, including interest.

In July 2023, the 50th GST Council decided to levy a 28% GST on the full face value of online gaming, effective from October 1, 2023. This decision led to multiple shutdowns and several layoffs in startups operating in the gaming industry.

More than 100 Indian entrepreneurs, CEOs, and industry bodies involved in real-money gaming have written to the Indian government, seeking a reconsideration of the decision.

Gaming companies such as Gameskraft, Dream11, Probo, and MPL also received such notices, and some of them challenged the retrospective tax in the Supreme Court. However, the apex court transferred 27 writ petitions pending in 11 high courts across the country.