The real money gaming industry is preparing to approach the Goods and Services Tax (GST) Council for relief on legacy tax liabilities after the Supreme Court’s ruling in the Gameskraft case significantly reduced the sector’s potential tax exposure. According to Exchange4media, a local media outlet, industry stakeholders are now seeking a policy solution to resolve historical tax disputes that persist despite the court’s clarification on GST valuation.
Supreme Court settles long running tax dispute
The Supreme Court (SC) recently settled a major dispute over the valuation of online money gaming transactions under the GST regime. The court directed tax authorities to recalculate pending tax demands under Rule 31B of the Central GST Rules instead of the valuation method previously adopted by the revenue department.
The dispute began after tax authorities issued show cause notices to online gaming companies, fantasy sports platforms and casinos. Authorities sought to levy GST at 28 per cent on the face value of every individual bet placed on gaming platforms. In the case of casinos, the tax calculation also included chips that were repeatedly used during gameplay.
Due to this interpretation, the sector saw tax demands totalling about Rs 2.5 lakh crore ($26.5 billion). Despite reporting revenue of approximately Rs 4,650 crore ($492 million) over the relevant period, Gameskraft alone received a GST demand of approximately Rs 21,000 crore ($2.23 billion).
Court links GST to player deposits
According to the Exchange4media report, the SC ruled that the taxable value of online money gaming should be linked to player deposits under Rule 31B and not to every wager placed after the initial deposit. The court also clarified that winnings reused for gameplay without first being withdrawn and redeposited cannot be treated as fresh deposits for GST purposes.
The ruling has substantially reduced the tax exposure faced by gaming companies. However, historical tax demands issued before the judgment continue to remain a concern for many operators.
Industry plans to approach GST Council
Gaming firms and trade associations are anticipated to petition the GST Council for exemption from legacy tax obligations after the ruling. Exchange4media claims that the sector would probably ask for a regularisation or amnesty process for disagreements pertaining to the time frame prior to October 1, 2023.
Industry associations, including the All India Gaming Federation, the E-Gaming Federation and the Federation of Indian Fantasy Sports, are expected to submit representations seeking rationalisation of historical tax demands.
The industry argues that companies across the sector followed a common interpretation of the GST provisions before the rules were clarified, making the dispute one of interpretation rather than tax evasion.
Why the pre October 2023 period matters
The GST framework for online money gaming changed from 1 October 2023 after the government amended the law to levy 28 per cent GST on the full value of player deposits made with gaming platforms. The recent Supreme Court ruling deals primarily with valuation disputes relating to the earlier period.
According to the report, legal experts believe that the GST Council has the authority to recommend an amnesty scheme or a mechanism to regularise historical tax demands. However, any waiver or reduction in tax liability would require amendments to the CGST Act and related notifications, as the Council can only make recommendations.
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