Experts to decide game of chance or skill: Karnataka HC to tax dept on Gameskraft GST notice

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The Karnataka High Court Thursday heard the arguments in the plea filed by online rummy and rmg operator Gameskraft against the GST notice of INR 21,000 crore. Senior advocate Dr. Abhishek Manu Singhvi represented the Bengaluru based company before the bench of Justice SR Krishna Kumar.

Singhvi took the court through various judgments on the question of games of chance and skill. He also referred to the recent division bench decision of the Karnataka High Court on the validity of gaming ban law enacted last year.

During the hearing, the bench noted that if it comes to conclusion that it is settled by apex court and high court division bench that it is a game of skill, that would end the matter. During the hearing, the bech queried how the department has classified the games in question as games of chance. “Are you competent, first of all……. the experts have to decide the nature of the game, not the officer. What does officer know? I am just saying,” the bench queried.

Senior Advocate Mukul Rohtagi, appearing for intervenor – E Gaming Federation said they support the petitioner. Senior Advocate Arvind Datar also appeared for another intervenor – AIGF.

The tax authorities are of the view that online gaming companies in India have allegedly conducted massive tax evasion in the past few years. Gameskraft notice is the first notice in a series of notices that may be issued in near future.

The dispute arises from the tax department categorising the rummy, poker as games of chance while judicial precedents have held them to be skill games. Games of chance including betting and gambling are taxed at a higher rate of 28% on entire pool amount while skill gaming companies are discharging tax only on the platform fee claiming pool amounts as actionable claim not liable to GST.

The company said it has paid more than INR 1,500 crores as taxes to the Government exchequer (as Income tax and GST) till June, 2022.

Intervenor EGF submitted that clubbing of taxation regimes of constitutionally protected commercial activity with activities like betting and gambling is a direct violation of Article 19(1)(g). The hearing will continue on Friday.