GST on Online Gaming: SC Orders Stay on Show Cause Notices

In an order dated January 10, 2025, the Supreme Court stayed the show-cause notices issued to online gaming companies, amounting to over INR 1.5 lakh crore.[1]

In the instant case, the Revenue challenged the decision dated May 11, 2023, passed by the Karnataka High Court, which set aside the September 2022 show cause notice to Gameskraft Technologies Pvt. Ltd. regarding the imposition of tax to the tune of INR 21,000 crore. The High Court had held that online rummy games played on Gameskraft’s platforms were not taxable as ‘Betting’ and ‘Gambling’ since they were “substantially and preponderantly” games of skill and not of chance. The Supreme Court later stayed this decision in September 2023.

Earlier, a batch of 27 writ petitions challenging the imposition of 28% GST on online gaming, pending across High Courts in the country, were transferred to the Apex Court. These petitions were tagged with the abovementioned special leave petitions (the Gameskraft case).

While Revenue believes that the 28% GST must be levied on the entire prize pool, the gaming companies, attempting to distinguish between the amounts deposited and the revenue earned, maintain that the GST is to be levied on the platform fee or the commission.

After the Revenue expressed that some of the show cause notices were likely to get time-barred by the first week of February 2025, the Court issued a stay on the further proceedings of the impugned show cause notices till the final disposal of the matters. It follows that the deadline for action on the show cause notices has been moved further.

The case will be next heard on March 18, 2025.

[1] Directorate of Goods and Services Tax Intelligence (HQS) and Ors. v. Gameskraft Technologies Private Limited and Ors. [SLP (C) Nos. 19366-19369/ 2023)