Karnataka HC to deliver verdict in Rs 21,000 crore Gameskraft GST evasion case on May 11

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The long-awaited judgement in the Rs. 21,000 crore Gameskraft GST evasion case will be pronounced tomorrow on May 11 at 2.30 pm by a single judge bench of the Karnataka High Court, comprising Justice SR Krishna Kumar.

The final judgement in the case would clarify if the government’s stand to levy 28% GST on the entry amount of online real money skill games is correct. The judgement holds massive significance as it would impact the entire online gaming industry.

Back in September 2022, the GST Intelligence unit had issued a showcause notice to Gameskraft demanding Rs 20,989 crore in taxes for the period August 2017 to June 2022. As per the notice, the GST department believed that the services provided by Gameskraft come under betting and gambling and are subject to 28% GST as per Rule 31A of the CGST Rules, 2017.

Furthermore, the tax department also said that the company was not issuing invoices to the customers which is a direct violation of Section 15(3) of the CGST Act, 2017. Gameskraft, in its plea to the Karnataka HC, claimed that it had paid over Rs 1,500 crore in GST till date and the tax department was failing to distinguish between games of skill and chance.

The Karnataka HC then sought response from the Directorate General of GST Intelligence (DGGI) which claimed that Gameskraft had filed their taxes under the wrong head and the services provided by the company attract 28% tax rate.

In October 2022, not-for-profit gaming body E-Gaming Federation (EGF) filed an intervention application saying that the result in the Gameskraft case will have a direct and material impact on the entire online gaming industry, including online rummy operators.

Referring to an old case of RMC Chamarbaugwala, EGF claimed that the Supreme Court (SC) had recognized the difference between skill-based games and chance-based games. Both Madras and Karnataka HCs have also previously ruled that gaming and betting apply to games of chance and do not include games of skill.

During a hearing on October 27, 2022, the Karnataka HC bench headed by Justice SR Krishna Kumar asked about how the GST department concluded the services provided by Gameskraft are games of chance. “The experts have to decide the nature of the games and not the officers at the department,” the bench had said.

Senior Advocate Mukul Rohtagi and Senior Advocate Arvind Datar, who represented EGF and All India Gaming Federation respectively, were also present during the hearing in support of the petitioner, Gameskraft, which was represented by Senior Advocate Dr. Abhishek Manu Singhvi.