Safiya Malik

The Supreme Court has stayed Goods and Services Tax (GST) proceedings against 49 online gaming companies. These proceedings arose from retrospective tax demands issued based on the full face value of bets placed on their platforms. The Bench of Justices JB Pardiwala and R Mahadevan granted the stay upon the GST department's request and scheduled the matter for further hearing on March 18, 2024.

The case involves retrospective tax demands issued by the GST department following the GST Council's imposition of a 28% tax on the full face value of online gaming bets starting October 1, 2023. While the Council promised a review of the levy after six months, the gaming industry has opposed the tax, advocating for its calculation on Gross Gaming Revenue (GGR). GGR represents the total bets placed minus winnings, whereas the full face value includes the total bet amount or contest entry fees.

Online gaming companies argue that taxing the full face value is excessive, as users are already subjected to a 28% GST on every deposit made. The retrospective application of the tax—from August 2017 to October 2023—has exacerbated industry concerns. The GST Council has classified all bets during this period, whether from games of skill or chance, as gambling, making them subject to the 28% levy.

As of December 2023, 71 show-cause notices alleging GST evasion of ₹1.12 lakh crore had been issued to online gaming companies. These notices, issued under Section 74 of the GST Act, allow penalties of up to 100% of the tax demand. Consequently, the total liability, including penalties and interest, could exceed ₹2.3 lakh crore. Over 40 petitions challenging these notices are currently pending before the Supreme Court.

In one high-profile case, Gameskraft Technology faced allegations of failing to pay ₹21,000 crore in GST for transactions between 2017 and June 2022—the largest claim in India’s indirect taxation history. The company was accused of enabling online betting through platforms such as Rummy Culture, Gamezy, and Rummy Time and failing to issue proper invoices. Authorities imposed a 28% tax on approximately ₹77,000 crore in betting volume.

Gameskraft contested the notice in the Karnataka High Court, which ruled in its favor. The High Court held that “Rummy is a game of skill” and that Gameskraft was not involved in supplying actionable claims, thereby invalidating the GST notice. This decision dealt a significant blow to the GST department, which subsequently appealed directly to the Supreme Court, bypassing the division bench of the Karnataka High Court.

During the Supreme Court proceedings, Additional Solicitor General (ASG) N Venkataraman, representing the GST department, argued that some show-cause notices were set to expire in February 2024 and that a stay was necessary to protect the Revenue's interests. He stated that “Not staying these proceedings could harm the Revenue’s interests.”

The Bench stayed the Karnataka High Court’s judgment that had invalidated the Gameskraft GST notice, observing that “We do not want other courts to use this as a precedent.” The GST department argued that the High Court’s ruling had halted action on at least 35 similar show-cause notices, creating significant obstacles to the department's enforcement efforts.

The Supreme Court ordered a stay on all ongoing GST proceedings against the 49 online gaming companies and listed the matter for hearing on March 18, 2024.

Senior Advocates Harish Salve, Dr. AM Singhvi, Sajjan Poovayya, Dhruv Mehta, and Gopal Sankaranarayanan represented the petitioners, alongside Advocate Charanya Lakshmikumaran. Advocate Shyam Gopal appeared for Winzo Games.

Case Title: Gameskraft Technology Private Limited v. GST

Case Number: N/A

Bench: Justice JB Pardiwala and Justice R Mahadevan