New Delhi: The Supreme Court ruling upholding GST levy on online gaming companies, which have been slapped with over Rs 1 lakh crore worth of showcause notices under GST, will put pressure on their margins, and survival will hinge on aggressive cost-rationalisation and rapid business model adaptation, tax experts said on Wednesday.
In its judgement on Wednesday, the Supreme Court ruled in favour of the Revenue Department and upheld the 28 per cent (now 40 per cent) GST framework, and recognised stake-based online gaming as betting and gambling for GST purposes.
In August 2023, the GST Council clarified that 28 per cent GST would be levied on the full value of bets placed on online gaming platforms. Since then, a host of gaming companies have received either an intimation notice or a show-cause notice for short payment of Goods and Services Tax (GST), cumulatively amounting to Rs 1 lakh crore.
Thereafter, the companies approached the courts to contest the tax authorities' claims.
"The Court has fundamentally altered the legal and commercial terrain for gaming operators. Major real-money gaming operators such as Gameskraft, Dream11, Mobile Premier League (MPL), Games24x7, Junglee Games, Delta Corp and several online rummy, poker and fantasy sports platforms are likely to feel the immediate impact of the ruling whether through ongoing tax disputes, business-model recalibration, investor scrutiny, or future compliance costs," said Nangia Global, Executive Director- Indirect Tax, Sivakumar Ramjee.
AKM Global, Lead- Indirect Tax, Ikesh Nagpal said that going forward, online gaming companies will have to make a hard commercial decision, whether to settle, restructure, or wind down. "Investors and foreign backers will be reassessing their positions, and fresh capital into the sector will be difficult to attract given the confirmed legal and regulatory headwinds. Some platforms may pivot to free-to-play or advertising-based models to survive, while others may explore offshore restructuring," Nagpal said.
EY India, Tax Partner, Saurabh Agarwal said the Supreme Court's ruling fundamentally alters the sector's fiscal landscape.
"Upholding the 28 per cent GST on full face value - especially with retrospective impact - creates an immediate, steep financial burden that cannot be passed on to consumers. As the industry faces a sharp phase of consolidation and liquidity pressures, companies must immediately recalibrate their financial structures. Survival will hinge on rapid business model adaptation, aggressive cost-rationalization, and absolute regulatory alignment," Agarwal said. agencies