Online gaming firms oppose retrospective 28% GST, not the levy itself

Gaming firms tell Supreme Court they accept 28 per cent GST on entry value but challenge retrospective tax demands based on gross volume rather than real stakes

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The gaming industry is not opposed to a prospective levy of 28 per cent Goods and Services Tax (GST) on the full face value of entry amounts under the current framework, but it is against the move to apply the tax retrospectively, online gaming companies told the Supreme Court on Wednesday.

 

The GST Council in 2023 decided to impose a flat 28 per cent tax on the face value of online gaming, casinos and horse racing, and accordingly amended the GST laws (CGST Act and IGST Act). The new rule came into effect from October 1, 2023. The amendments specified that GST would be levied on entry-level bets on online gaming platforms, and not on amounts paid by players in each game from their winnings.

 

Online gaming companies had challenged the amendment, but the apex court in 2023 refused to grant interim relief against GST demand notices issued to them. The court had then agreed to consider the legality of the government’s decision to impose 28 per cent GST retrospectively on the full value of bets placed, rather than on the gross gaming revenue.

 

Gaming firms have argued that the 28 per cent tax should be applicable only from October 1, 2023. The government, however, contended that the October 1 revision merely clarified a law already in force, and that the tax demand was not backdated.

 

Advocate Abhishek A Rastogi, appearing for online poker platforms, told the court that the core issue is whether such a retrospective tax imposition is legally valid and constitutionally justifiable.

 

“The tax assessment has been erroneously computed on the total amount ‘churned’—that is, the gross transaction volume passing through the platform—rather than the actual ‘pooled’ amount, which constitutes the real monetary consideration or stake pooled by players,” he argued.

 

“The distinction is critical: the churned amount may include internal platform movements or virtual transfers that do not reflect real income or revenue, thereby inflating the tax liability disproportionately,” he added.

 

The bench is expected to continue hearing arguments through the week. On Tuesday, the Centre reiterated its position that gambling, whether based on skill or chance, remains gambling and is therefore liable to be taxed accordingly.