Gaming cos get no relief in SC on tax claims exceeding Rs1 trillion

The Supreme Court on Friday declined to grant a stay order on show-cause notices issued by tax authorities to online gaming companies, and adjourned the hearing to 8 January.

The E-Gaming Federation (EGF), along with firms including Play Games24x7 and Head Digital Works, had petitioned against retrospective goods and services tax (GST) claims collectively exceeding ₹1 trillion.

With the petition for a stay declined, the companies fear more such notices could be issued even as the legal debate on gambling versus skills-based online gaming remains unsettled.

A Supreme Court bench, led by Chief Justice D.Y. Chandrachud, refused to issue a notice on the gaming industry’s appeal, saying that the government’s counsels, headed by additional solicitor general N. Venkataraman, had not yet received a copy of their petition.

Senior lawyer Harish Salve, appearing on behalf of EGF and the gaming firms, urged the apex court to provide interim protection restraining tax authorities from issuing further notices until the matter is heard again.

Games24x7 declined to respond to a text query on the ongoing petition. An EGF spokesperson could not be reached immediately.

On 27 September, Mint reported that the Directorate General of GST Intelligence (DGGI) was in the process of issuing notices with regard to retrospective GST claims for the previous five fiscal years, amounting to nearly ₹1.5 trillion.

Games24x7, according to three industry officials who requested anonymity, faces a projected tax claim of up to ₹20,000 crore.

An industry official who works with multiple gaming firms facing similar petitions said that while the apex court’s refusal to issue a stay on further DGGI tax claims was “not a major setback”, companies will look for respite from the overall tax burden when further hearings commence next month.

But “this also leaves the scope open for further tax claims, even though there is no constitutional provision for retrospective tax claims of this nature,” the official said.

“The DGGI continues to not recognize the difference between gambling and skill-based online gaming, even though the final three weeks leading up to the next hearing shouldn’t see too many further such notices.”

As of October-end, 71 show-cause notices had been issued to gaming firms amounting to cumulative tax claims of ₹1.12 trillion, Minister of State for Finance Pankaj Chaudhary informed Parliament on 5 December.

The GST claims saga began with DGGI’s ₹21,000-crore tax claim against Bengaluru-based online gaming startup Gameskraft. The Karnataka High Court ruled in favour of the company in a landmark verdict, following which DGGI appealed in the Supreme Court. The top court stayed the high court’s verdict.