Supreme Court Notices Petitions by Gaming Companies Challenging 28% GST on Online Gaming
Last Updated on January 10, 2024 by News Desk
The Supreme Court has taken a significant step by issuing notices and seeking the Centre’s response on a series of petitions filed by major online gaming entities such as Dream 11, Games 24×7, and Head Digital Works. These petitions challenge the constitutional validity of the imposition of a 28% Goods and Services Tax (GST) on their operations.
Representing the gaming companies, Senior Advocate Harish Salve highlighted the arbitrary nature of the GST imposition. He emphasized that the tax was being applied to the entire value of bets, not just the revenue of the companies, even for periods preceding the stated implementation date. This has led to these companies receiving demand notices for previous financial years.
Salve further delved into the crux of the matter, raising crucial questions. One of these pertains to whether an actionable claim can be categorized as goods without a constitutional amendment. He pointed out that the current provision values the supply of an actionable claim in gambling activities at 100% of the bet or totalisator amount.
In the courtroom dialogue, Salve clarified that the tax isn’t on the entire collection but rather on the “churn” involved. He argued against the notion of taxing the entire value of bets, questioning where the supply of actionable claims exists in this scenario.
The advocate presented three key aspects for the court’s consideration. Firstly, whether actionable claims can be deemed goods without altering the established definition. Secondly, even if actionable claims are classified as goods, whether wagering can generate actionable claims. Lastly, whether there is an actual supply of actionable claims in these gaming scenarios.
The government’s representative contended that previous judgments have classified lottery as an actionable claim constituting goods. Additionally, they argued that these gaming platforms effectively organize and regulate the games, providing a service rather than a mere platform for gambling.
The court, issuing notices and seeking responses within two weeks, has requested updates on related compilations. It’s a pivotal move that sets the stage for a significant legal debate around the taxation of online gaming platforms, emphasizing the need for clarity regarding actionable claims, goods classification, and the nature of services provided in such setups.
Written — Athi Venkatesh
