The Indian Supreme Court will hear a case on January 10th regarding whether to grant a stay on show cause notices issued to online gaming companies over retrospective GST tax demands.
Earlier this week, reports indicated that several Indian gaming firms are appealing to the Supreme Court for interim relief from retroactive GST demands. These companies, fearing coercive action from tax authorities, have requested the stay until a final decision is made.
The court has agreed to hear the matter, which may also include setting a date for a final hearing.
The total tax demand on these e-gaming firms is estimated at Rs1.08 lakh crore (Rs10.8 billion or approximately $130 million).Â
Last year, the Supreme Court agreed to hear appeals against the retrospective application of a revised 28 percent GST rate imposed on online gaming companies.
The firms are challenging the tax department’s decision to impose this tax on the full value of bets placed before October 1st, 2023. Given that numerous petitions are pending in various high courts, the Supreme Court consolidated all cases for a definitive ruling.
In August, changes to the GST Act added online gaming to the list of taxable actionable claims—along with lottery and gambling—subject to the 28 percent tax, set to take effect from October 1st, 2023. The tax is levied at the point of deposit, regardless of whether the games are based on skill or chance. The government has argued that this liability was “pre-existing” and has only been “clarified,” not altered, by the amendment.
These changes have led to a flood of GST notices for gaming companies, with demands now far exceeding their earnings. The companies had expected the new tax rate to apply from October 1st, 2023, onward.
Following the update regarding the appeal, shares of Indian gaming operator Delta Corp surged more than 7 percent in Wednesday trading.
