The Supreme Court on Monday issued a notice to the government seeking a response to a plea filed by online gaming companies on tax demands adding up to ₹1.5 lakh crore. The court, however, did not issue a stay on the tax notices issued by the government.
A three-judge bench of the Supreme Court led by Chief Justice D.Y. Chandrachud has granted the Union government and the tax department two weeks to file a response.
The E-Gaming Federation, along with Play Games24x7, Head Digital Works and other gaming startups, had petitioned the court against retrospective goods and services tax (GST) claims.
On 27 September, Mint had reported that the Directorate General of GST Intelligence was in the process of issuing notices to online gaming companies regarding retrospective GST claims for the previous five fiscal years, amounting to nearly ₹1.5 trillion.
The issue originated in August when the GST Council amended the law to “clarify” that online games involving bets would attract a tax rate of 28% on the full value of the bets placed. This was to become effective from October.
Gaming companies argue that the 28% tax should be applicable only from 1 October, but the government contends that the revision clarified an existing law, and, thus, its demand for tax dues was not retrospective.
Finance minister Nirmala Sitharaman recently said in the Lok Sabha during a discussion on the GST (Second Amendment) Bill that the valuation rules for imposing a 28% GST on entry-level bets on online gaming platforms were effective prospectively.
“28% is the tax, and as to who it will apply to and on whom the incidence will fall is clearly explained… The valuation rules to exclude winnings are prospective,” Sitharaman said.
Meanwhile, the GST Department has informed the apex court that it will file a petition seeking the transfer of all cases related to the issue from various high courts to the Supreme Court.
In September, the Supreme Court stayed a Karnataka High Court ruling that had quashed a GST notice on Bengaluru-based Gameskraft Technology for alleged tax evasion amounting to ₹21,000 crore.