Will the Supreme Court grant relief to RMG firms against retrospective GST notices?

The Supreme Court has postponed hearings until July 31 for petitions challenging retrospective notices issued by the Goods and Services Tax (GST) on real-money gaming companies.

A total of thirty petitions have been filed against demands exceeding Rs 1.5 lakh crore, calculated at a 28 percent rate on the face value of bets.

Chief Justice of India DY Chandrachud hinted on July 18 that these cases would be scheduled for further directions on July 31, with hearings likely set for a later date.

Among these petitions, twenty-seven have been transferred from various high courts to the Supreme Court. Initially filed by Head Digital, Play Games24x7, and Baazi Games, one petition was brought by the GST department challenging a Karnataka High Court decision.

Until December, real-money gaming companies faced 71 show-cause notices for alleged GST evasion totaling Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24, excluding interest and penalties.

On July 18, Nazara Technologies, a diversified gaming and sports media firm, reported that its subsidiaries Openplay Technologies and Halaplay Technologies were directed to pay nearly Rs 1,120 crore.

In August, the GST Council decided to impose a 28 percent GST on the full face value of player deposits, regardless of whether the game involves skill or chance.

Previously, online gaming platforms paid an 18 percent GST on platform fees, also known as Gross Gaming Revenue (GGR), which is the commission operators charge players for participating in games.

Recently, tax authorities issued retrospective tax notices to several skill-based gaming firms, including Dream Sports, Gameskraft, Games 24×7, Delta Corp’s Deltatech Gaming, and Head Digital Works (A23).

According to the GST Council, all online games involving bets played between August 2017 and October 1, 2023, regardless of skill or chance, are subject to a 28 percent GST on the full value of bets due to their categorization as gambling.

Despite courts ruling that games of skill should not be taxed similarly to games of chance, the GST Council’s decision eliminates this distinction.

On June 22, the GST Council recommended an amendment to the Central Goods and Services Tax (CGST) Act, 2017, granting the government authority to discuss and overturn any retrospective demands issued by authorities.