GST evasion notice: GST Department to move SC against HC relief to Gameskraft

The revenue department has decided to move Supreme Court against the Karnataka High Court order that quashed a Rs 21,000-crore GST show-cause notice on Bengaluru-based online gaming company Gameskraft. The notice was issued by the Directorate General of GST Intelligence (DGGI) in September 2022 in which it alleged that GamesKraft escaped GST (goods and services tax) payment to the tune of Rs 21,000 crore for the period between 2017 and June 30, 2022.

"The legal team has studied the high court’s order to decide the possible course of action. The department is quite clear that the notice followed a thorough investigation. So the department will be soon moving a petition in the apex court against the high court order,” a government official privy to the discussion told.

In its reply to the Karnataka HC, the revenue department highlighted that, "the platform allows players of online rummy to place stakes and bet on the outcome. In addition, the Bengaluru firm is making a profit and gains from rummy played on its platform, which amounts to betting and gambling."

Key Insight about this case

• The revenue department is alleging that Gameskraft escaped GST payment by classifying its online rummy games as games of skill, when they are actually games of chance.
• The department is also alleging that Gameskraft is making a profit from its rummy games, which amounts to betting and gambling.
• Gameskraft has denied these allegations and has said that it is a legitimate business that is subject to GST.
• The Karnataka High Court has quashed the GST notice, but the revenue department is now planning to appeal the decision to the Supreme Court.
• The definition of "betting and gambling" under GST is still unclear.
• The revenue department is facing challenges in collecting GST from the online gaming industry.
• The online gaming industry is growing rapidly in India and it is likely to become a major source of revenue for the government in the future.

The case is still ongoing, and it is unclear how the Supreme Court will rule. However, the case is likely to have a significant impact on the online gaming industry in India.

Here are some additional insights into the case

• The case raises important questions about the classification of online gaming games. Are they games of skill or games of chance? This distinction is important because games of skill are not subject to GST, while games of chance are.
• The case also raises questions about the definition of betting and gambling. Is it possible to make a profit from a game of skill without it being considered betting or gambling?
• The case is likely to have a significant impact on the online gaming industry in India. If the Supreme Court upholds the Karnataka High Court's decision, it could open the door for other online gaming companies to challenge GST notices. This could lead to a significant reduction in GST revenue for the government.

Overall, the case is a complex one with far-reaching implications. It will be interesting to see how the Supreme Court rules.