The Supreme Court of India has temporarily halted the Goods and Services Tax (GST) proceedings against 49 online gaming companies, following a controversial retrospective demand for taxes that had been raised against them. This decision, announced on Friday, has positively impacted the stock prices of several listed companies in the sector.
Justices J.B. Pardiwala and R. Mahadevan issued the interim order during a hearing scheduled for March 18. Market analysts viewed this ruling as a significant relief for online gaming firms that had received notices alleging GST evasion amounting to ₹1.1 lakh crore. Given that the GST Act permits penalties of up to 100% on tax demands, the total liability could potentially reach ₹2.3 lakh crore.
In October 2023, the GST Council had decided to impose a 28% tax on the face values of online gaming bets, which was interpreted by tax authorities as a clear mandate. This led to the issuance of tax demands for periods prior to this decision. Various gaming companies have contested these retrospective notices.
The gaming sector advocates for a taxation model based on gross gaming revenue (GGR) rather than the face value of bets. Prior to this development, these companies had been subjecting their platform fees or GGR to an 18% tax rate.
Saumya Rathore, co-founder of Winzo—the petitioner alongside firms like Gameskraft and Games24x7—expressed hope for a fair resolution, stressing its importance for fostering innovation, job creation, and enhancing investor confidence. He emphasized that clarity on tax regulations is crucial for several companies planning to go public, positioning India’s gaming sector for potential global leadership.
In September 2023, the Supreme Court had already intervened in a similar case, staying a Karnataka High Court ruling that quashed a GST notice against Gameskraft for alleged tax evasion of ₹21,000 crore. The powerful gaming lobby is urging the GST Council to reconsider its decision, expressing concerns about its negative impact on the industry.
While some states requested a review of the GST decision six months later in October 2023, the GST Council has yet to discuss the matter, amid contradictions between the gloomy financial outlook presented by the gaming companies and actual industry performance.
On a day when the Sensex fell by 0.3% (231 points), casino operator Delta Corp saw its shares rise by 4.9% to close at ₹118.9. OnMobile shares climbed by 0.6%, while Nazara Technologies experienced an 8.5% spike after the Supreme Court’s ruling, ultimately closing 3.3% lower.
