GamesKraft GST issue: SC to hear central govt appeal tomorrow

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Centre’s appeal before Supreme Court challenging Karnataka High Court’s order in Gameskraft GST matter involving a tax demand of INR 21,000 crores is up for hearing tomorrow.  As per the cause list, the issue is listed as item 15 before a three member bench headed by Chief Justice.

A battery of senior lawyers including Dr. Abhishek Manu Singhvi, Mukul Rohatgi, and Aravind Datar are expected to represent the respondents.

The GST department had issued notices for a tax demand of whopping INR 21,000 crores against skill gaming operator GamesKraft last year and the gaming company soon filed a plea with the Karnataka High Court seeking to quash the notice in which the decision was delivered in May 2023. Karnataka High Court had quashed the tax notice issued by the department leading to the present appeal.

The revenue department in the appeal has argued that wagering/betting/gambling is not dependent on the underlying nature of the game. The revenue argued that a game of skill with stakes cannot escape from being declared as betting or gambling as the outcome of the event is still uncertain and unforeseen and not in control of the participants. The petition also sought to distinguish contests with entry fees and prize money, where the entire proceeds of the entry fee collected from participants is used towards the prize pool and organisational expenses, without profit or gain of the organiser or platform, from online rummy for stakes offered by Gameskraft.

The GST Council in two successive meetings held on 11 July and 2 August has clarified the tax rate for online gaming as 28% on deposit amount and Finance Minister Nirmala Sitharaman hoped that necessary legal amendments can be passed to make the levy effective from 1 October, 2023. The amendments to this effect were recently passed the union government.

However, the department has on numerous occasions informed that this is only a clarification of existing provision and it will continue to pursue tax matters before judicial authorities and claim retrospective dues from online gaming companies from 2017 onwards