India’s biggest online gaming players are seeking a review of the court’s recent decision to impose 28% Goods and Services Tax (GST) on the online real-money gaming industry. As a landmark decision for the industry, the court has opened up tax demands for around ₹1.5 lakh crore, leading to a revolt by major gaming platforms.
According to industry sources, Play Games24x7 and Junglee Games have already submitted review petitions to the top court. Many more online gaming companies will do so soon as well, in light of the immense pressure on the industry that is coming from the payment side.
The petitioners argue that the Supreme Court should have referred the matter to a larger Constitution Bench since the court as well as constitutional and legal issues are so important. The companies believe the taxation of online gaming needs to be a judicial examination because the tax law and constitutional aspects and interpretation of tax law and constitutional principles matter.
One of the main arguments of gaming companies is that the court was wrong to determine GST was only applicable to the formation of actionable claims and not only for the transfer of winnings. Under the GST framework, this interpretation is said to broaden taxation.
The sector has always claimed that online games that involve skill should be treated differently from gambling or betting. Operators say imposing a 28% entry fee or competition fees is an overpricing for businesses and players in India and will make the online gaming market less competitive than in other countries.
The Supreme Court in recent days had also backed the government's decision to implement a 28% GST on the full face value of bets or deposits made for online real-money gaming. The ruling also lent the tax authorities a better footing to pursue pending GST demands in the amount of around ₹1.5 lakh crore against several gaming companies.
Industry experts say the review petitions are one of the last legal options for gaming companies to seek and pursue constitutional remedies before they can look for other constitutional remedies. Review petitions are generally allowed only in exceptional circumstances, and the companies hope the court will reconsider some aspects of the ruling due to the impact of an increasingly competitive online gaming space.
The merits and demerits of these review petitions would be closely watched by gaming companies, investors, tax experts, and policymakers. A favorable decision could significantly reduce the industry’s tax burden, while the rejection of these petitions would enhance the existing GST framework of the government and tax dues recovery can be faster.
As the legal battle continues, the future taxation model for India’s online real-money gaming industry will be heavily scrutinized in the next few years as the Supreme Court will ultimately decide the future of the legal system as well as the taxation to regulate and finance the sector for years to come.
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