Shares of gaming companies faced significant selling pressure as the Supreme Court upheld the government’s decision to impose a 28% Goods and Services Tax (GST) on online gaming platforms. Delta Corp, known for its licensed casinos and luxury hotels, saw its shares plummet by 17.76% to Rs 66.60 on the BSE. Similarly, Nazara Technologies, a diversified gaming and sports media platform, experienced a 5.07% decline, trading at Rs 274.80.
The court’s ruling is anticipated to have a substantial financial impact on online gaming firms, which have been embroiled in a prolonged legal battle regarding the tax treatment of online gaming activities. The Supreme Court clarified that online gaming platforms should not be viewed solely as intermediaries, asserting that such activities generate actionable claims under GST law. Additionally, the court noted that legislative amendments validating the tax imposition apply retroactively.
Following the verdict, gaming-related companies witnessed sharp drops in their stock prices as investors evaluated the potential consequences of increased tax obligations and regulatory uncertainties in the industry. The dispute originated in September 2023 when the Supreme Court stayed a Karnataka High Court order that had nullified a Directorate General of GST Intelligence (DGGI) notice seeking approximately Rs 21,000 crore in GST from Gameskraft.
Gaming companies contended that online gaming operators act as intermediaries facilitating contests and do not provide actionable claims to players, making retrospective GST demands unsustainable. Conversely, tax authorities argued that online gaming platforms essentially function within betting and gambling frameworks, rendering player stakes taxable under the highest GST slab. Notably, cumulative tax demands from show-cause notices against online gaming companies total nearly Rs 91,684.81 crore, with the inclusion of casinos raising the overall tax demand to around Rs 1.08 lakh crore.
In August 2023, the government amended GST laws, mandating overseas online gaming companies to register in India from October 1, 2023.
