11.05.2023: Big relief for Gameskraft, Karnataka HC quashes Rs 21,000-crore GST notice

The Karnataka High Court on May 11 quashed a goods and services tax notice against Bengaluru-based online gaming company Gameskraft Technology for alleged evasion of Rs 21,000 crore, an order which will have a bearing on India's skill-gaming sector that is awaiting GST clarity.

In September 2022, a GST intelligence unit issued a show-cause notice  to Gameskraft Technology, alleging that the company failed to pay Rs 21,000 crore in GST, the biggest such claim in the history of indirect taxation. The notice was for the period between 2017 and June 30, 2022.

Gameskraft Technology Private Limited (GTPL) was also accused of promoting online betting through cards, casual and fantasy games such as Rummy Culture, Gamezy, and Rummy Time. Gameskraft allegedly was not issuing invoices to customers, the officials alleged.

GST officials slapped a 28 percent tax on betting amount of nearly Rs 77,000 crore. “GTPL was engaged in the betting by allowing its players/gamers to place bets in the form of money stakes on outcome of card games played online,” the authorities said.

The gaming platform submitted fake/back dated invoices, which was uncovered during a forensic examination of the documents, they alleged, adding that the company was also inducing its customers to bet as there was no way of returning  the money once it was added in the wallet.

The Bengaluru-based startup, however, argued that its offerings qualify as skill-based gaming activities, which attract only 18 percent GST on the platform fee, which the company deducted from the entry fee paid by players. The fee typically ranged between 5-15 percent of the contest entry amount with the rest of the money channeled towards the players’ prize pool, it said.

Commenting on the High Court's verdict, Joyjyoti Misra, group general counsel of Gameskraft said “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”

Started in 2017, Gameskraft's portfolio of real-money gaming platforms include online rummy game Rummyculture and a multi-game platform Gamezy that offers rummy, fantasy sports, and online ludo among others.

Source: Money Control

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