07.09.2023: Supreme Court stays Karnataka HC order quashing ₹21,000-crore GST matter of GamesKraft

The Supreme Court has stayed Karnataka High Court’s ruling in the matter of online gaming company GamesKraft. In May, the High Court had stayed a show cause notice (SCN) for deposit of GST due totalling Rs. 21,000 crore. The matter has been listed for hearing after three weeks.

The company runs platforms such as Rummy Culture, Rummy Platform and Rummy Partner. According to sources in GST Department, the notice was issued after it was found that people betted on the platform. They said that face value of total bet was Rs. 77,000 crore during 2017 and 2022. Since it was game of chance, a rate of 28 per cent was applied, and after penalty the total amount comes to over Rs. 21,000 crore.

The Apex Court ruling is a second big setback to the online gaming industry after GST Council recommended uniform 28 per cent tax on the face value for online gaming, casinos and horse racing and amendment in GST laws (CGST Act and IGST Act). After that the Government enacted a legislation to implement the recommendation.

The amendments make a clear distinction between online gaming and online money gaming, specifying that in online money gaming the player pays or deposits an amount in the expectation of winning some amount in a game or event. The amendments do not affect tax on casual online gaming, in which no real money or betting or wager is involved.

The activity of online money gaming will be taxed on the total amount paid or payable to or deposited with the supplier, by or on behalf of the player, irrespective of whether the game is based on skill, or chance, or both. Further, “the Act has been amended to clearly provide that actionable claims involved in or by way of casinos, horse-racing and online gaming are covered under the ambit of GST,” a government source explained.

The definition of “supplier” is proposed to be amended to ensure that individuals or entities operating and managing digital or electronic platforms for supplying specified actionable claims are considered suppliers of such actionable claims and are liable to pay GST on the same. Also, registration under GST is being made mandatory for a person supplying online money gaming, from a place outside India to a person in India.

The amendment in IGST Act provides for tax liability on overseas suppliers of online money gaming, and also provisions for simplified GST registration for such suppliers, as well as powers for blocking websites/platforms of non-compliant suppliers.

“This is intended to allay the concerns of the domestic online gaming industry that these amendments in relation to online money gaming may lead to shifting of such online money gaming to platforms outside India,” second source quoted above said, while emphasising that it will provide a level playing field to domestic suppliers of online money gaming.

Source: The Hindu Business Line

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