The Supreme Court on Wednesday backed the government’s decision to impose 28% GST retrospectively on online gaming companies, validating tax demands of over Rs 1 lakh crore. A bench led by Justices JB Pardiwala and R Mahadevan ruled in favour of the government, saying that once money is staked on a game, the distinction between “game of skill” and “game of chance” becomes irrelevant for GST purposes. The court observed that games involving money stakes can be treated similar to betting and gambling under GST laws. The judgment ends a long-running legal battle between gaming companies and tax authorities over how GST should be calculated on online real-money games. Companies such as Dream11, Games24x7, Head Digital Works, and Gameskraft had argued that GST should apply only to the platform fee or commission earned by them, also known as gross gaming revenue (GGR), and not on the full contest amount deposited by users. However, the government maintained that once users place money on uncertain outcomes, the entire amount becomes taxable at 28%. The court accepted this interpretation. The ruling also revives the massive GST notices issued to gaming companies since 2022. Earlier, the Karnataka High Court had quashed a Rs 21,000 crore GST notice issued to Gameskraft. The Supreme Court has now set aside that relief. According to government data shared in court earlier, authorities had issued 91 show-cause notices to online gaming firms involving alleged tax liabilities of around Rs 1.44 lakh crore. Industry executives have repeatedly warned that such huge retrospective demands could severely hurt the sector and push several startups towards closure. The verdict comes at a time when India’s online gaming sector is already facing tighter regulatory scrutiny and slowing investor interest. Industry players are now expected to assess the financial impact of the ruling and evaluate their next course of action. Bareback Media has recently raised funding from a group of investors. Some of the investors may directly or indirectly be involved in a competing business or might be associated with other companies we might write about. This shall, however, not influence our reporting or coverage in any manner whatsoever. You may find a list of our investorshere.
