The Karnataka High Court has sought the response of the Directorate General of GST Intelligence (DGGI) after GamesKraft Technologies filed a plea challenging a show cause notice of INR 21,000 Cr tax evasion notice. The next hearing will be on the 11th of October.

GamesKraft Technologies has moved to the Karnataka High Court against the Directorate General of GST Intelligence (DGGI) after the latter issued a notice to the gaming startup despite a stay order on an intimation notice by the court. The notice claimed that the company had misclassified the service while filing taxes instead of actionable claims, which are taxable at 28%.

It is worth noting that the debate on differential tax rates arises as the DGGI has classified Gamescraft games as chance based, which invites a GST of 28%. While the company itself categorizes it as a skill-based game, which is taxable at 18%. GST GoM constituted in May is yet to submit its final report on the classification and valuation of gaming supplies.

N Venkatraman, additional solicitor general (ASG) representing the DGGI at the Karnataka High Court, argued that the stay order on the show-cause notice is unnecessary since the initial notice provides the company with 30 days to respond.

While the Bangalore-based startup has stated that it has paid all the dues amounting to ₹1,500 crores in GST for FY22, which is much less than what the DGGI’s notice warrants.

The tax authorities are of the view that online gaming companies in India have allegedly conducted massive tax evasion in the past few years. “The Bengaluru wing of the DGGI has issued show cause notice to online gaming company GamesKraft Technology Private Ltd for an amount of Rs 21,000 crore,” a source was quoted in a recent report.