The Supreme Court has fully upheld the Goods and Services Tax (GST) show-cause notices issued to online gaming companies. The court said that it is constitutionally correct to charge 28% tax on the full value of deposits on the gaming platform. The country’s highest court rejected the petitions of Delta Corp and other gaming companies challenging the decision to impose 28% GST retrospectively. The court made it clear that activities related to online gaming come under the ambit of actionable claims under the GST Act, hence it is absolutely right to collect tax on them. States got the right to ban money games. The Supreme Court also made it clear in its decision that state governments have full right to ban online money games. Even if those games require skill, state governments can ban or regulate them completely. Along with this, the court has accepted the appeals of Tamil Nadu and Karnataka governments. The Supreme Court has set aside earlier decisions of the Madras High Court and the Karnataka High Court, which had struck down state laws banning or regulating bets on online gaming as unconstitutional. The court has also completely removed the interim relief granted to gaming companies by the Karnataka High Court. Companies can respond to tax notices. The Supreme Court has now directed the GST authorities to start further processing of these show cause notices as per the law. However, along with this the Court has also said that the affected online gaming companies are completely free to file their replies on these show-cause notices issued by the GST authorities. There was a dispute over the tax notice of Rs 2.5 lakh crore. Last year, in August 2025, the Supreme Court had reserved its decision in the case of retrospective tax notice of about Rs 2.5 lakh crore issued against real-money gaming (RMG) platforms. The main reason for this entire controversy was the different interpretations regarding the method of tax calculation. Mathematics of Full Deposit vs Gross Gaming Revenue The tax department demanded that companies would have to pay tax at the rate of 28% on the entire amount deposited by users on the platform (full face value of deposit). Gaming companies, on the other hand, argued that they should only pay tax on the commission they earn for hosting tournaments, called gross gaming revenue (GGR). According to the companies, this commission is only 5% to 15% of the total deposit amount. The gaming companies had also argued before the court that the total amount of GST demanded by the tax department is many times more than the total earnings of these companies. If this tax is collected, companies will eventually have to shut down their entire operations. New online gaming law and crisis In August 2025, about two weeks after the Supreme Court reserved its decision, the Government of India enacted a new online gaming law, which was named ‘Promotion and Regulation of Online Gaming Act’ (PROGA). This law prohibits all online money games where a user directly or indirectly deposits money with the expectation that he or she will receive winnings on that deposit. Loss to $3.5 billion industry Due to the implementation of this new law, the country’s $3.5 billion real-money gaming industry suddenly came into crisis. Due to complete stoppage of earnings, companies had to suffer huge financial losses and they started cutting expenses on a large scale. Because of this, gaming companies had to fire more than 3,000 employees. These new rules related to the gaming industry have officially come into effect from May 1, 2026. What is retrospective tax and actionable claim? Also read this news… Hyundai cars will be costlier by ₹ 12,800: New prices will be implemented from June 1, 2026, the company decided due to increase in input costs. Hyundai Motor India cars are going to become costlier from June 1, 2026. The company has decided to increase the prices of its cars by up to Rs 12,800. The new prices will be decided on the basis of different models and variants. Read the full news…
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SC said- 28% GST on online gaming companies is right: States got the right to ban money games; If tax is collected many companies will close down
