GST showcause notices to gaming companies: Writ Petitions by EGF, A23, and Games24x7 to be heard by Supreme Court on 8th January

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The writ petitions filed industry body EGF, and gaming companies A23 & Games 24×7 are listed for hearing on Monday, 8th January, 2024 by a three judge bench of the Supreme Court comprising of the Chief Justice, Justices Pardiwala & Misra. The matter at the time of writing this article reflects at item no. 21 in the cause list. In the first hearing last month, the Supreme Court refused to stay the showcause notices issued to online rummy companies or pass any interim directions.

CJI Chandrachud remarked that adjudication on the GST issues pertaining to online gaming was pending before the court in a similar manner and no interim relief can be granted to the online gaming companies at this stage. He was referring to GamesKraft matter in which the Supreme Court stayed the decision of Karnataka High Court quashing Rs. 21,000 crore showcause notice against the Bengaluru based company.

GamesKraft matter was also expected to be tagged with these batch of cases but as of now it appears the matter has not been tagged yet.

Harish Salve, Senior Counsel representing EGF and the online rummy companies on December 15, 2023 submitted that the matter has all India significance and showcause notices worth several times the companies’ turnover are being issued. He further submitted that if the notices fructify into demands, then the companies are looking at bankruptcy. He further prayed that assurance be given that the department keep their hands off and no action on the showcause notices be taken until further hearing.

About 71 show-cause notices have been issued for alleged GST evasion worth Rs 1.12 lakh crore after the Supreme Court stayed the order of Karnataka High Court in Gameskraft matter.

Industry executives and legal experts expressed that any unfavourable ruling from the apex court in these cases could be the final nail in the coffin for the money  gaming industry which is already embattled by 28% GST implemented since October last year. 

Many rmg companies have independently challenged the show cause notices in state High Courts which in majority of instances have granted interim reliefs.

ASG Venkataraman appearing for the tax department has last month informed the Calcutta High Court that the government will soon approach the Supreme Court for clubbing similar tax matters pending at various High Courts