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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 Business Standard.
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.
It said that the contention that the game of rummy played on its platform was a game of skill deserved to be rejected. On the contrary, it is nothing but a pure game of chance.
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When any person, including a player of rummy, wagers, stakes or bets on the outcome of a game of rummy, the outcome of which is unknown and uncertain until the game gets over, such activity of wagering, staking or betting on the unknown and uncertain outcome will “tantamount to betting and gambling irrespective of the nature of the underlying game, i.e., of skill or of chance”, the revenue department explained.
“The tax rules under GST are very clear in terms of betting. So, the department is determined that the case will soon reach finality in the court of law,” said the official cited above.
GST officials had imposed a 28 per cent tax on a betting amount of nearly Rs 77,000 crore. It was alleged that Gameskraft was engaged in betting by allowing its players/gamers to place bets in the form of money stakes on the outcome of card games played online.
The taxation issue with respect to online gaming firms has been contentious. That is why the GST Council tasked a state minister panel to look into the distinction between game of skill and game of chance and the taxation issue around it. The panel could not arrive at a consensus and referred the matter back to the Council. The Council, which is expected to meet later this month, may take up the matter and resolve it.
