The Supreme Court on Friday stayed all showcause notices issued by the GST authorities to various online gaming platforms as it restrained the government from acting upon the notices until it resolved the dispute relating to the 28 per cent GST levied on the games.

The dispute related to GST tax demand made by the revenue authorities over alleged tax avoidance by the online gaming companies to the tune of over ₹1.20 lakh crore on the basis of the 28 per cent GST sought to be levied by the government.

A bench of Justice J. B, Pardiwala and Justice R. Mahadevan passed the order on the batch of petitions filed by the gaming companies before various high courts, which was subsequently transferred by the apex court to itself in January last year on an application filed by the Union government.

The Centre had filed the transfer application for transfer of the multiple petitions filed in over nine high courts of the country to the Supreme Court for an authoritative pronouncement and avoiding conflicting judgments by different high courts.

When the matter came up for hearing on Friday, the apex court stayed the notices issued by the GST authorities until the matter was adjudicated by the top court. The court posted the matter for further hearing to March 18.

Additional Solicitor-General N. Venkataraman who appeared for the government said the total GST demand was around ₹1.2 trillion but some of the notices were due for expiry by February this year.

It is the case of the online gaming companies like- “Games 24x7”, “Play Games 24X7” and others that the levy of 28 per cent GST was “arbitrary” and “unfair” as they were only gaming platforms and the contest is essentially between the players, he said.

As such it is contended that if GST is to be levied it has to be on the platform fee and not on the total prize money as is sought to be done. Further, according to these companies the online games cannot be treated as “games of chance,” as it is more a “games of skill,” hence the levy of 28 per cent GST was excessive, he added.

The issue snowballed into a major controversy when the revenue department declared in August 2023 that online gaming companies would have to pay GST at 28 per cent from the day that GST came into force.

Online gaming companies have been sent 71 show-cause notices.

Stock impact

It was a mixed bag for gaming company stocks on Friday on the bourses. While Delta Corp surged 4.90 per cent to ₹118.90, Nazara Technologies was down 3.26 per cent at ₹958.60 on the BSE.

“Nazara Technologies Limited has recently acquired 35.07 per cent of Moonshine Technology Private Limited, associate of the company, whose subsidiaries are party to the proceedings. However, Nazara Technologies Limited and its subsidiaries are not party to the legal proceedings before the Supreme Court....Hence, we are unable to offer any further comment,” the company informed stock exchanges on Friday.

Delta Corp was yet to respond to a clarification sought by the stock exchanges.

With inputs from Calcutta bureau