As reported last week, the revenue department will in all likelihood file an appeal directly to the Supreme Court against the single-bench ruling of the Karnataka High Court that had quashed the Rs. 21,000 crore Goods and Services Tax (GST) showcause notice issued to Gameskraft Technologies Private Limited.

It may be noted that by an order dated 11th May, 2023, Justice SR Krishna Kumar of the Karnataka High Court while quashing the showcause notice to Gameskraft had observed that online rummy being a game of skill does not amount to betting and gambling and consequently, online rummy services offered by the company do not amount to gambling and betting and cannot be taxed at 28% on the face value of the bet.

While it was almost certain that the Directorate General of GST Intelligence (DGGI) would file an appeal against the single-judge order of the Karnataka High Court, the normal course of action earlier would have been an appeal to the division bench of the High Court.

However, as per media reports, the view within the revenue department is to now appeal directly to the Supreme Court and also file transfer petitions to get pending matters in Rajasthan, Punjab & Haryana and other High Courts where interim reliefs were given against similar showcause notices issued to MyTeam11, Probo, Witzeal and other companies clubbed and heard together by the Supreme Court.

It may be noted that Probo, MyTeam11 and Gameskraft have filed caveats in the Supreme Court in order to enable them to be heard before the apex court issues notice or passes any orders.

Media reports also indicate that the GST Council may take up the complicated issue of taxation of online gaming, horse racing and casinos for discussion in the upcoming 50th meeting of the Council scheduled tentatively for later this month or next month and take action on the Group of Ministers (GoM) report on the issue, and make recommendations either adopting or modifying the suggestions made by the GoM.

The gaming industry is hoping that there is conclusion and finality both from the GST Council and courts on key definitional and valuation issues surrounding gaming and gambling at the earliest, as currently there is a massive overhang on the valuation of taxation. If one goes by the department estimates and their interpretation of the manner of paying GST, the total tax liability for the entire industry could exceed Rs. 2 lakh crores (more than US$25 billion).