The Directorate General of GST Intelligence (DGGI) has informed the Supreme Court that online gaming firms are engaging in activities akin to betting and gambling, making them liable for GST under the existing tax laws. Representing the DGGI, Additional Solicitor General N Venkataraman clarified to a bench led by Justice JB Pardiwala that it’s not the platform but the speculative nature of the games that triggers taxation.
He argued that games like rummy, regardless of being labeled skill-based, produce outcomes that are speculative and, therefore, fall within the gambling category. Venkataraman maintained that wagering money in such games amounts to gambling, and companies should not seek exemptions under the guise of offering a service.
Gaming platforms have historically paid 18% GST, but the DGGI asserts that the applicable rate is 28% under the CGST Act due to the nature of the transactions. The case ties into 71 show cause notices issued over alleged tax evasion of ₹1.12 lakh crore between FY23 and part of FY24.
The SC had earlier granted temporary relief in January by pausing retrospective tax claims. However, the online gaming industry is already feeling the pressure, with many layoffs and shutdowns after the October 2023 decision to levy 28% GST.
