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Supreme Court decision to determine fate of India’s online gaming: lawyers

In a recent legal analysis, Shankey Agrawal and Lopamudra Mahapatra from BMR Legal considered that India’s online gaming industry finds itself at a “crossroads” as it awaits a crucial verdict from the Supreme Court regarding the legality of a 28 percent tax imposed on gaming companies since the inception of GST.

“The unprecedented attention the online gaming sector has garnered from policymakers, owing to its exponential revenue growth post-pandemic. However, amidst this boom, the industry faces daunting tax demands, ranging up to billions of dollars, presenting a formidable challenge to its viability,” the lawyers pointed out in a joint article published in the India Business Law Journal.

Traditionally, India has discouraged gambling and betting, leaving the regulation of these activities to individual states. The distinction between skill-based and chance-based games has long been established, with skill-based games exempt from state levies.

For Agrawal and Mahapatra, the classification of online rummy as a game of skill, protected under constitutional provisions, underscores the industry’s complex legal landscape.

Despite legal precedents favoring skill-based games, the GST Department has raised tax demands on gaming companies, equating online gaming with gambling.

In a surprising move, the 50th GST Council meeting categorized online gaming on par with gambling and betting activities, subjecting it to a hefty 28 percent tax levy. This decision, seen as a substantive change to tax law, has stirred concerns within the industry about its financial sustainability,’ the lawyers described.

A Karnataka High Court’s ruling in favor of taxpayers was ‘temporary relief’, pending a final verdict from the Supreme Court.

‘As the Supreme Court prepares to commence its final hearing, industry stakeholders remain hopeful for a favorable outcome that addresses the nuances of online gaming taxation. The industry’s future hinges on the court’s decision, with high expectations for a resolution that ensures its growth and viability in the years to come,’ they added.

Nelson Moura
Nelson Moura
Editor and reporter with 10 years of experience in Greater China, namely Taiwan and Macau, in printed and online media, with a focus on finance, gaming, politics, crime, business and social issues.