28% GST: EGF and A23 approach Supreme Court against show cause notices under CGST Act, 2017

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Industry Association E-Gaming Federation (EGF) and money gaming platform A23 have approached the Supreme Court challenging the constitutional validity of certain CGST Act, 2017 provisions and the CGST Rules as they existed before the recent amendments and the retrospective interpretation of 28% GST provisions by the department. EGF is already one of the respondents in the pending appeal by the DGGI in the GamesKraft matter.

EGF said a fresh cause of action has arisen since show-cause notices have been issued to its members and new issues have been raised in the present petition including the constitutional validity of the provisions of the CGST Act. The demand for A23 is close to Rs. 6,500 crores. EGF claimed that the show-cause notices are based on the allegation that the games played are gambling and betting. EGF said unenforceable gambling debts can never be tantamount to gambling and betting.

The petition said the measure adopted under Rule 31A of the CGST Rules has no nexus with the character of GST and Parliament has no legislative competence under Article 246A of the Constitution. EGF said the notices are directly contrary to established jurisprudence that games of skill whether played for stakes or not are not betting and gambling.

GamesKraft matter is expected to be heard on 15 December and the EGF matter may also be tagged with the same. In the previous hearing, the DGGI successfully obtained a stay against the Karnataka High Court’s decision to quash the notice. Subsequently, several gaming companies across the country and casino operators in Goa and Sikkim were issued notices for the recovery of tax based on the full face value of their operations.

Aggrieved by the notices, gaming companies have approached various High Courts. Currently, petitions challenging the GST notices are pending with the High Courts of Bombay, Sikkim, Gujarat, and Calcutta.

In a recent hearing before the Calcutta High Court, Additional Solicitor General N Venkatraman said the DGGI will devise a common strategy and may soon approach the Supreme Court for clubbing similar tax matters pending at various High Courts.