SC upholds 28% GST on online gaming with retrospective effect

The Supreme Court on Wednesday upheld the government’s retrospective levy of 28 per cent GST on online gaming companies and observed that such imposition was constitutionally valid.

A bench comprising Justices J B Pardiwala and R Mahadevan said online gaming platforms are not mere intermediaries but are to be treated as suppliers amenable to the Goods and Service Tax (GST) regime on levies and taxes. “Online gaming activities, including fantasy sports and other games played on digital platforms, involving staking upon uncertain outcomes, constitute betting and gambling for the purpose of GST framework,” the bench said.

“The levy of GST on the supply of actionable claims arising from betting and gambling is constitutionally valid and does not transgress Articles 366(12) and 366(12A) of the Constitution,” the apex court said in its judgment.

The top court also upheld the validity of laws enacted by the Tamil Nadu and Karnataka governments, which banned online games played for stakes, including games of skill such as rummy and poker. GST authorities in October 2023 issued show cause notices to online gaming companies for tax evasion. The government amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1, 2023, onwards.

In August 2023, the GST Council clarified that 28 per cent GST would be levied on the full value of bets placed on online gaming platforms.

Gaming companies moved various high courts against such GST demands, contesting the claims of the revenue authorities.

The top court had allowed a petition of the Centre and transferred to itself pleas challenging the imposition of 28 per cent GST on e-gaming firms from nine high courts for an authoritative pronouncement.

Many online gaming firms like Games 24x7, Head Digital Works and Federation of Indian Fantasy Sports had moved the top court challenging the imposition of GST.