Earlier this year, the top court had agreed to hear pleas challenging the retrospective application of the revised GST rate of 28% levied against online gaming companies. The e-gaming firms are challenging the tax department’s stance to impose 28% GST on the full-face value of the bets for the period prior to Oct. 1, 2023.
According to changes introduced by the government in the GST Act in August, online gaming was added to the list of actionable claims—along with lottery, betting and gambling—that attract 28% tax. This change was to be made applicable on Oct. 1, 2023.
It was decided that the tax will be levied at the point when the deposit is made, irrespective of whether the activities are a game of skill or chance, as long as they are played with stakes.
The government has taken the stance that this liability was “pre-existing” and that the law has not been amended in this regard but only “clarified.”
The tax department has been issuing GST notices for the period prior to Oct. 1 as well. This has led to a battery of GST notices being slapped on these companies, with demands that are running into multiples of their earnings. It has culminated in a huge difficulty for these companies as they were under the impression that the new rate of tax would be applicable prospectively from Oct. 1, 2023, onwards.
Last year, the top court also issued a stay on a Karnataka High Court ruling that quashed a Rs 21,000-crore show-cause notice to Gameskraft Technologies Pvt. by the Directorate General of GST Intelligence.
