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Synopsis

In a significant relief to online gaming companies, the Supreme Court of India has recently stayed Goods and Services Tax (GST) show-cause notices amounting to Rs 1.12 lakh crore against online gaming companies and casinos over alleged tax evasion.

A bench of Justice JB Pardiwala and Justice R Mahadevan has granted relief in petitions filed by online gaming companies challenging the GST department's proceedings after notices were issued against them for alleged tax evasion.

The bench, accordingly, listed the matter for final hearing on March 18, 2025.

During the course of proceedings, Advocate Abhishek Rastogi, appearing for the online gaming companies, argued that the stay on further proceedings protected his clients from 'coercive actions' and ensured that the demands raised in the show-cause notices would not lapse due to the limitation period.

However, Additional Solicitor General N. Venkataraman, appearing for the Union, argued before the bench that a 28 per cent GST should apply to the contest entry amount. In April 2024, the Top Court took over 27 writ petitions pending across nine State High Courts, challenging the imposition of 28% GST on all forms of online real-money gaming.

In September 2023, the Supreme Court had stayed the Karnataka High Court’s ruling whereby it had set aside show cause notice issued by the GST department directing online gaming company GamesKraft to deposit dues totaling to INR 21,000 crore.

A bench comprising CJI DY Chandrachud along with Justices JB Pardiwala and Manoj Misra had issued notice in the SLP filed by the GST department challenging the High Court's order and directed for a counter affidavit to be filed by Gameskraft in two weeks.

N Venkatraman, Additional Solicitor General drew the court's attention to a decision of a three Judge Bench of the Supreme Court in Skill Lotto Solutions Private Limited vs. Union of India & Ors.

After hearing the ASG's submission, the bench ordered thus, "Pending further orders, there shall be an ad interim stay of the impugned judgment and order of the Single Judge of the High Court of Karnataka. List the Special Leave Petition on 10 October 2023."

Gameskraft was issued an intimation notice from the GST authorities on September 8 last year, raising a demand of ₹21,000 crore. This notice was challenged before the High Court. A single-judge of Justice SR Krishna Kumar had stayed this notice, observing that there were several contentious issues in the case.

The online gaming company moved the High Court again, stating that despite this stay order, the authorities had illegally and maliciously issued a show-cause notice on the very same day as the High Court’s order for depositing of dues. 

Case Title: DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE (HQS) & ORS. vs. GAMESKRAFT TECHNOLOGIES PRIVATE LIMITED & ORS.