Amid the goods and services tax (GST) turmoil, the online gaming companies have reportedly told the Supreme Court that the industry does not oppose the prospective levy of 28% GST on the full face value of entry amounts, but it is against the move of applying the tax to past transactions.

During the court hearing, advocate for online poker platforms, Abhishek A Rastogi, raised concerns regarding the retrospective tax imposition and whether it is “legally valid and constitutionally justifiable”, Business Standard reported.

“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,” Rastogi said.

Furthermore, he argued that the churned amount may include internal platform movement or virtual transactions. This can result in inflation of tax amount.

On the counter, the Directorate General of GST Intelligence (DGGI) said that , which are subject to the GST. The authority believes that amounts staked by players in these games are taxable under the GST framework.

This comes at a time when the government is actively trying to intervene in the online gaming space. For instance, the Centre is finalising a move platforms such as Games24x7, Junglee Games, Dream11 and Head Digital Works (A23) under the purview of anti-money laundering laws.

Besides, state governments have also tightened the rules around online gaming in the recent past. Earlier this year, barring all minors (under the age of 18) from playing online real money games. The government also made it mandatory for these platforms to conduct KYC verification for account creation.

Besides, states like Andhra Pradesh, Telangana and Odisha had earlier put a ban on real money games.

In 2023, the GST council announced its decision to impose a 28% GST on the amount being paid at the entry level for online gaming. The finance ministry notified that this tax will be charged from October 1, 2023.

Companies including Gameskraft, Dream11, Games 24×7, and Head Digital Works, received GST notices and moved the Supreme Court to get a stay on these notices.

The new rules apply a 28% tax to the total value of bets for online games, irrespective of whether they are games of skill or chance. Previously, a lower 18% GST was levied, specifically on the platform fee for skill-based games.

In January this year, the Supreme Court against 49 real money gaming companies.

Notably, in the first six months after the imposition of the 28% GST regime, when compared to the preceding six months.

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