cancer survivor: SC refuses to grant stay on tax notices to egaming companies

The notices raised a demand of GST on the ‘buy in’ amount for each game and proceeds on the hypothesis that the staking of money in online games (whether of skill or chance) amounts to betting and gambling and that the ‘buy in’ constitutes as a transfer of goods as actionable claims, according to petitions challenging the notices.

The pleas were filed by the E-Gaming Federation and two of its members — Head Digital Works and Play Games 24×7 that face GST demand of Rs 6,497 crore and Rs 20,929 crore, respectively. They stated that there was no supply of an actionable claim by the online operator to the players and hence the levy of GST was “unsustainable”.

On Friday, additional solicitor general N Venkatraman told a bench led by Chief Justice DY Chandrachud that the petitions by the e-gaming companies have not been served on the government and the issue related to taxation on online gaming is a “serious and a sensitive” matter.

Senior counsel Harish Salve and counsel Badri Narayanan, appearing for the federation and the companies, said “the matter has all India significance and show cause notices worth several times the companies’ turnover are being issued. We want limited protection. Show cause proceedings have been going on for a few months, we are giving all the information, but they (the tax department) should hold their hands for three more weeks” till the SC hears the case.

The show cause notices were issued after the government clarified that online gaming, betting, and gambling will be levied 28% GST on the full face value from October 1. The government believes that some of these firms leveraged the lack of clarity on taxation of “game of chance” and “game of skill” before October 1 and there was a need to have a uniform 28% GST on the full value of bets placed on online gaming platforms. The government also amended the GST law making it mandatory for overseas online gaming companies to register in India from October 1.

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On September 5, the apex court stayed a Karnataka High Court order that quashed a Rs 21,000 crore GST notice issued to online gaming platform Gameskraft.Besides challenging the show cause notices issued to them, the petitioners have also challenged the constitutional validity of Section 9 read with Section 2(52) of the Central Goods and Services Tax Act, 2017 in so far as it imposed GST on “actionable claims” as being beyond the legislative competency of Parliament. They also questioned Rule 31A (3) of the CGST Rules, 2017 as being ultra vires the CGST Act, and thus being manifestly arbitrary, unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution of India, the petitions filed through counsel Charanya Lakshikumaran stated.

The notices raised a demand of GST on the ‘buy in’ amount for each game and proceeds on the hypothesis that the staking of money in online games (whether of skill or chance) amounts to betting and gambling and that the ‘buy in’ constitutes as a transfer of goods as actionable claims, according to petitions challenging the notices.

The pleas were filed by the E-Gaming Federation and two of its members — Head Digital Works and Play Games 24×7 that face GST demand of Rs 6,497 crore and Rs 20,929 crore, respectively. They stated that there was no supply of an actionable claim by the online operator to the players and hence the levy of GST was “unsustainable”.

On Friday, additional solicitor general N Venkatraman told a bench led by Chief Justice DY Chandrachud that the petitions by the e-gaming companies have not been served on the government and the issue related to taxation on online gaming is a “serious and a sensitive” matter.

Senior counsel Harish Salve and counsel Badri Narayanan, appearing for the federation and the companies, said “the matter has all India significance and show cause notices worth several times the companies’ turnover are being issued. We want limited protection. Show cause proceedings have been going on for a few months, we are giving all the information, but they (the tax department) should hold their hands for three more weeks” till the SC hears the case.

The show cause notices were issued after the government clarified that online gaming, betting, and gambling will be levied 28% GST on the full face value from October 1. The government believes that some of these firms leveraged the lack of clarity on taxation of “game of chance” and “game of skill” before October 1 and there was a need to have a uniform 28% GST on the full value of bets placed on online gaming platforms. The government also amended the GST law making it mandatory for overseas online gaming companies to register in India from October 1.

Discover the stories of your interest

On September 5, the apex court stayed a Karnataka High Court order that quashed a Rs 21,000 crore GST notice issued to online gaming platform Gameskraft.Besides challenging the show cause notices issued to them, the petitioners have also challenged the constitutional validity of Section 9 read with Section 2(52) of the Central Goods and Services Tax Act, 2017 in so far as it imposed GST on “actionable claims” as being beyond the legislative competency of Parliament. They also questioned Rule 31A (3) of the CGST Rules, 2017 as being ultra vires the CGST Act, and thus being manifestly arbitrary, unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution of India, the petitions filed through counsel Charanya Lakshikumaran stated.