Online gaming firms seek SC review of 28% GST, retrospective tax

Major online gaming firms, including Play Games24x7 and Junglee Games, have moved the Supreme Court. They are seeking a review of its May 27 judgment which upheld the 28% GST levy and rejected challenges to retrospective tax demands.

Major online gaming companies have approached the Supreme Court seeking a review of its May 27 judgment that upheld the constitutional validity of the 28 per cent Goods and Services Tax (GST) levy on online gaming and rejected challenges to retrospective tax demands estimated at over Rs 1.5 lakh crore.

According to the Supreme Court's case status portal, review petitions have already been filed by Play Games24x7 Pvt. Ltd. and Junglee Games India Pvt. Ltd. Several other online gaming companies are also expected to file similar review petitions.

Arguments in the Review Petitions

A review petition filed by Head Digital Works Pvt. Ltd. contends that the case involved substantial constitutional questions that ought to have been referred to a larger Constitution Bench. It argues that the Supreme Court committed errors apparent on the face of the record while upholding the levy and seeks reconsideration of the judgment.

The gaming companies contend that the Supreme Court erred in permitting GST to be levied on the creation of actionable claims instead of limiting the levy to the transfer of winnings. According to the review petitions, GST should become payable only when winnings are transferred to players and not merely when an entry amount is paid to participate in a game.

Another principal challenge relates to the interpretation of the amendments introduced to the GST law through the "sunrise clause". The companies argue that the Supreme Court's interpretation effectively gives retrospective operation to the amended provisions even though the revised legal framework came into force only in October 2023. According to the review pleas, the 28 per cent GST regime should therefore apply prospectively from October 2023 and not to transactions undertaken before the amendments took effect.

The petitions also contend that the judgment results in an inconsistent tax treatment between online and offline gaming despite both involving similar underlying activities.

Challenge to State Online Gaming Laws

Apart from the GST challenge, the review petition filed by Head Digital Works also seeks reconsideration of the Supreme Court's May 27 judgment upholding the validity of the Tamil Nadu and Karnataka online gaming laws. The petition argues that the judgment is per incuriam as it departs from binding Constitution Bench and three-judge Bench decisions recognising games of skill as protected business activities under Article 19(1)(g) of the Constitution. It further contends that the judgment wrongly equates staking on games of skill with betting and gambling and overlooks competence-related issues arising from central legislation governing online gaming. Parliament enacted the Promotion and Regulation of Online Gaming Act, 2025 (PROGA) to establish a central regulatory framework for online gaming, including online real-money games, and provide for regulation through designated authorities and prescribed compliance mechanisms.

Context and Significance

The review petitions come after the Supreme Court, in its May 27 verdict, upheld the constitutional validity of the 28 per cent GST levy on online gaming and dismissed a batch of petitions challenging retrospective GST demands, paving the way for the recovery of dues estimated at around Rs 1.5 lakh crore.

The review proceedings are expected to be closely watched by the online gaming industry, as they may determine whether the apex court revisits the scope and temporal application of one of the country's biggest indirect tax disputes. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)