The Supreme Court of India has delivered a twin blow to the online gaming sector, ruling that it falls under the Central Goods and Service Tax (CGST) Act and upholding state laws banning digital platforms.
The court held that online gaming services supply an 'actionable claim' which is taxable, and the companies are 'suppliers' of these services. The decision resolves the legal tangle involving tax on online gaming platforms, specifies the nature of the game, and clarifies whether the gaming companies have a fundamental right to carry on such trade.
The court also upheld state laws banning online betting and gambling, citing public health and public order concerns due to the rise in suicides, depression, and addiction among youngsters.
The ruling has significant implications for the online gaming industry, which has been growing rapidly in India. The industry had argued that GST can be charged only on 'supply' of goods or services, and that they only facilitate a service by providing the technological platform for users.
However, the court rejected these contentions, holding that the online gaming services supply an 'actionable claim' which is taxable. The decision is a landmark one, and it is expected to have a significant impact on the online gaming industry in India.
