Breaking: Karnataka HC quashes Rs 21,000 crore showcause notice issued to Gameskraft for GST evasion

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In a landmark judgement for the online gaming industry, the Karnataka High Court has quashed the Rs. 21,000 crore showcause notice issued to online skill gaming platform Gameskraft by the Directorate General of GST Intelligence (DGGI). The final verdict was given by the single judge bench, comprising Justice SR Krishna Kumar.

The DGGI had contended that the gaming services provided by Gameskraft amounted to betting and gambling and should attract a GST rate of 28% to be paid on full entry fee. The HC, however, has now put the argument to rest, saying the games provided by Gameskraft come under games of skill.

“We are very pleased with the verdict of the Karnataka High Court. It is a clear vindication of our business model. We had and continue to have full faith in the government and the judiciary. We are hopeful that this decision will pave the way for constructive dialogues with the GST authorities and will form the basis of progressive GST regulations for the industry,” said Joyjyoti Misra, Group General Counsel, Gameskraft.

The DGGI had issued a showcause notice in September 2022 demanding over Rs 20,000 crore in taxes for the period August 2017 to June 2022. Gameskraft filed a petition in response, claiming that they had already paid Rs 1,500 crore in taxes and the DGGI was failing to recognize that the games offered on their platform were skill-based.

During the previous hearing in October 2022, the Karnataka HC had said that only experts would decide if the games provided by Gameskraft were games of skill or games of chance. The DGGI had claimed that the games provided on the gaming platform needed to be classified as games of chance and hence should attract 28% GST instead of 18%.

E-Gaming Federation (EGF), along with All India Gaming Federation (AIGF), had also filed intervention applications in support of Gameskraft, believing that the final verdict would have direct and material impact on the entire online gaming industry.

The AIGF has welcomed the verdict. Roland Landers, CEO of AIGF, said,”This landmark decision by the Hon’ble Karnataka High Court reiterates six decades of jurisprudence, clearly distinguishing constitutionally protected games of skill from gambling and betting activities. The judgment will greatly aid gaming start-ups across India to work towards building the industry and ensure its healthy growth. AIGF had intervened in the case on the limited question of law on behalf on the industry and especially to safeguard the interest of our smaller members.”

“Being the oldest and the largest industry body, and the voice of the MSME gaming start-ups, we believe that a progressive and rational GST policy will boost investments within the sector, and make this sunrise sector a cornerstone for Hon’ble PM’s vision of a 1 trillion dollar digital economy. We had and continue to have full faith in the government and the judiciary, and are hopeful that this progressive decision will pave the way towards clarity and certainty from the GST Council in the GST policy for this sunrise sector,” Landers added.