The Supreme Court on Monday issued notices to the Centre and the Directorate General of Goods and Services Tax Intelligence (DGGI) on a plea filed by online gaming companies challenging the levy of 28 per cent Goods and Service Tax (GST) on all forms of online real-money gaming. However, it did not stay the notices.

Hearing petitions filed by Play Games 24 7 Private Limited and others, a bench of Chief Justice of India DY Chandrachud with Justices JB Pardiwala and Manoj Misra sought response from the government. Another matter is pending before the Court as Centre appealed against Karnataka High Court staying notice to GamesKraft. The High Court ruling has been stayed.

Notices issued

Last month, Finance Ministry informed the Rajya Sabha that 71 show-cause notices involving GST to the tune of over ₹ 1.12-lakh crore have been issued to online gaming companies during financial years 2022-23 and 2023-24 (up to October 2023). “As these notices are pending adjudication, the respective GST demand is not yet determined under the provisions of CGST Act, 2017,” Minister of State in Finance Ministry Pankaj Chaudhary said in a written reply.

GST on online gaming has been a contentious issue. Earlier, online gaming companies supplying actionable claims were levying GST at the rate of 18 per cent on platform fees ranging from 5-20 per cent of the full-face value, disputing the 28 per cent levy on actionable claims in the form of betting and gambling supplied in online gaming before various legal fora.

Actionable claims

However, GST Council, in its meeting dated July 11, recommended that actionable claims supplied in casino, horse racing, and online gaming are leviable to a GST rate of 28 per cent and recommended to carry out amendments in the law to remove any ambiguity.

In the 51st GST Council meeting held on August 2, a few States requested that the matter be reconsidered and after detailed discussion, the GST Council decided to continue with its earlier recommendation. Later law was amended and then there was spurt in issuance of show-cause notices. Though the government said that amendments in law are clarificatory in nature and it has always maintained that 28 per cent rate is applicable from July 1, 2017, but online gaming companies alleged that amendment in law is retrospective in nature and accordingly show cause notices have been issued.