E-Gaming Federation, a not-for-profit gaming body has filed an intervention application in the pending case filed by GamesKraft before the Karnataka High Court. The Gameskraft plea pertains to a GST tax evasion notice of INR 21,000 crore received by the rummy operator on entire sums received from the players. In the plea, EGF said the case’s outcome would have a direct and material impact on the gaming industry and its members who include online rummy operators.
The case by Gameskraft raised the following two questions:
- Whether online rummy is a game of skill?
- Whether prize pool contributions made by the players in an online game of rummy hosted on the operators’ platforms is a consideration for a supply of actionable claims and therefore not liable to GST?
Stating EGF through its members has a direct interest in the outcome of the case, the impleading application said EGF’s presence is necessary for a complete and final decision in the case.
EGF said the pool fund held by the platforms are held in trust and are not a consideration for any provision of services. Referring to decades-old RMC Chamarbaugwala cases, the plea said Supreme Court recognised the distinction between games of chance and games of substantial skill, which are covered under trade and commerce.
The plea also referred to recent cases of Madras and Karnataka High Courts in relation to the gaming ban laws enacted by respective States. It said the terms betting and gambling are judicially interpreted to apply to games of chance to the exclusion of games of skill.
Referring to the Diwan Brothers case [AIR 1976 SC 1503], EGF said the terms betting and gambling used in CGST Act cannot include games of skill under its ambit. In Diwan Brothers case it was held that where a term has received judicial interpretation, it must be assumed that the term is used in that sense.
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). Finally, EGF prayed for a declaration that contributions made by players are actionable claims exempt from GST. The next date of hearing in the matter is on 27 October 2022.