Karnataka High Court Quashes Rs 21,000-Crore GST Notice Against Gameskraft

The Karnataka High Court has quashed a Rs 21,000-crore show-cause notice by the good and services tax department against online gaming platform Gameskraft Technologies Pvt.

The dispute mainly revolved around the tax rate that should be applicable to online games, especially rummy, offered by the platform. According to the company, the tax should be levied at 18% as applicable to a game of skill. However, the department contends that the game qualifies as a game of chance and must be taxed at 28%.

The notice reflected one of the highest disputed amounts in a GST case against any entity.

Last September, the Directorate General of GST Intelligence accused Gameskraft of making profits and gains from gambling and betting games like rummy.

Consequently, the platform is liable to pay a 28% GST on the face value of all collections made. The tax should be levied on the entire bet value and not the revenue accrued to the company, the department said.

Gameskraft had argued that online rummy is a game of skill that does not amount to betting. It had also contested the department's stand on service charge.

The DGGI had submitted that the platform is profiting from each game. It argued that the service charge levied by the company is varied and depends upon the amount of stakes involved. This amounts to betting as per the existing position of law as the profit of the platform is intrinsically related to the amount of stakes.

Gameskraft said it's merely an intermediary that facilitates transactions between players and does not earn any profit from such transactions, besides the service charge.

Reacting to the high court order, Gameskraft said the verdict was a "clear vindication" of its business model. "We had and continue to have full faith in the government and the judiciary," it said.

"We are hopeful that this decision will pave the way for constructive dialogues with the GST authorities and will form the basis of progressive GST regulations for the industry."