New Delhi, May 27 -- New Delhi: In a major setback for online gaming firms, the Supreme Court on Wednesday upheld the constitutional validity of the 28% goods and services tax (GST) levy on online gaming and rejected challenges against retrospective tax demands worth over Rs.1.5 trillion.

The ruling is expected to have far-reaching implications for the sector, with lawyers representing gaming firms warning of widespread insolvencies, and raising questions over the constitutional validity of a central law banning online gaming, since the verdict treats it as betting and gambling, a state subject.

The verdict, delivered by a bench of Justice J.B. Pardiwala and Justice R. Mahadevan, dismissed a batch of petitions filed by online gaming com...