GST notice to Gameskraft issued after stay of Rs 21,000 crore notice struck down by Karnataka HC
According to Gameskraft, the majority of these games are rummy, which they argued had been previously held to be a game of skill.
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A Rs 21,000 crore notice to Gameskraft had been stayed by the high court in September 2022.
A single-judge bench of the Karnataka High Court quashed a GST notice issued to online gaming platform Gameskraft on Thursday. Previously, a Rs 21,000 crore notice to Gameskraft had been stayed by the High Court in September 2022. The bench consisted of Justice SR Krishna Kumar. The order in its entirety is awaited.
The proceedings until date had hinged on the question of whether the online games under the platform would be considered games of skill or chance, as the latter attracts 28 percent GST but the former only 18. According to Gameskraft, the majority of these games are rummy, which they argued had been previously held to be a game of skill.
The GST Department on the other hand argued that it amounted to a platform for games of chance, and hence liable to taxation at 28 percent as they would come under “supply of actionable claim”. The GST department argued that this would be applicable to the entire buy-in amount being staked by the players, as opposed to the payment that Gameskraft was making, which was 18 percent calculated on the platform fees that was charged to both players.
A raid had also been conducted by the Directorate General of GST at Gamekrafts premises in November 2021. Gamekraft’s bank accounts were also attached under CGST Act.
An Intimation notice was issued under CGST Act , with a tax demand of Rs 21,000 crores in September 2022, after which Gameskraft obtained a stay order. In the present case, they argued that the show cause notice based on the stayed intimation notice was also received on the same day that the stay order was obtained, September 23. They further argued that Gameskraft could not be taxed as a “supplier of actionable claim” since they had no rights over the pooled money between the players, while also reiterating the position that rummy would have to be considered only as a “game of skill.”
The same notice was then quashed by order of the bench.
Reacting to the order, Sudipta Bhattacharjee, partner at Khaitan and Co, one of the many lawyers representing Gameskraft, said, ” “The GST authorities sought to levy GST against Gameskraft and in the last few months, against the entire online skill-gaming sector in India in a manner that is applicable only for companies indulging in ‘betting and gambling’, thereby obliterating the centuries old legally recognized distinction between ‘games of skill’ and ‘games of chance’. This is a historic judgement for the entire online gaming sector in India….”
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