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| Photo Credit: PTI

The Supreme Court on Friday (January 10, 2025) stayed showcause notices issued by GST authorities worth over ₹1 lakh crore to online gaming companies and casinos over alleged tax evasion.

A bench of Justices J.B. Pardiwala and R. Mahadevan said the matters required hearing and all proceedings against the gaming companies should remain stayed in the meantime.

Additional solicitor general N. Venkataraman, representing the GST department, said some showcause notices would come to an end in February.

The matter was posted on March 18.

GST authorities in October 2023 issued showcause notices to online gaming companies for tax evasion.

The government amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1, 2023 onward.

In August, 2023, the GST council clarified 28% GST would be levied on the full value of bets placed on online gaming platforms.

Gaming companies moved various high courts against such GST demands, contesting the claims of the revenue authorities.

The top court last year allowed a petition of the Centre and transferred to itself pleas, challenging the imposition of 28% GST on e-gaming firms, from nine high courts for an authoritative pronouncement.

Many online gaming firms like Games 24×7, Head Digital Works, Federation of Indian Fantasy Sports had moved the top court challenging the GST imposition.

The top court had stayed the Karnataka High Court verdict quashing the GST intimation notice to the tune of ₹21,000 crore issued to an online gaming firm.

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| Photo Credit: Getty Images/iStockphoto

The real money gaming industry — which runs games where users can stake money for winnings on apps — welcomed the Union Budget’s clarification on Tax Deducted at Source (TDS) for money won on their platforms. These platforms, referred to as “online gaming” by the government, are required to deduct 1% TDS from users when the latter withdraw their winnings and deposits.

Union Finance Minister Nirmala Sitharaman said that the government would be “removing the minimum threshold of ₹10,000 for TDS and clarifying taxability relating to online gaming.” This would allow real money gaming platforms to assess TDS on net earnings over the year instead of on individual transactions. “It is seen that deductors are deducting tax under Section 194 B and 194 BB of the Act by applying the threshold of ₹10,000 per transaction and avoiding tax deduction by splitting a winning into multiple transactions each below ₹10,000,” the government said in its memorandum explaining the Budget. “This is against the intention of legislature,” it emphasised.

‘Ambiguities cleared’

“It’s a progressive step as the government is creating a new section for the online gaming industry. It cements the recognition of online gaming as a distinct technology-driven entertainment sector,” Games24x7 Chief Financial Officer Rahul Tewari said in a statement. “[W]e will wait to get more clarity from the department on the computation mechanism.”

“[T]he government has cleared ambiguities regarding TDS calculation for online gaming and simplifies the process for both companies and users,” Vikash Sureka, the Mobile Premier League fantasy sports platform’s Chief Financial Officer, said in a separate statement.

“Since winnings in online gaming are given in both cash and in kind, it is important to note that even winnings paid in kind are taxable. And the obligation is on the gaming company to ensure that the winner pays the tax before the winning is given to him,” said Sanjay Tolia, tax leader at PwC.