Blow For Gameskraft: SC Stays K’taka HC Order Quashing INR 21,000 Cr GST Notice

In a major blow to online gaming startup Gameskraft, the Supreme Court on Wednesday reportedly stayed the Karnataka High Court order quashing the GST department’s show cause notice for an alleged evasion of INR 21,000 Cr.

A bench of Chief Justice of India (CJI) DY Chandrachud and Justices JB Pardiwala and Manoj Misra sought a response from Gameskraft and listed the matter for hearing after three weeks. “Do not worry…nothing is going to happen in three weeks,” the CJI orally remarked, as per a report by Bar and Bench.

CJI Chandrachud also permitted the Directorate of Revenue Intelligence of GST to file a rejoinder to the same. 

During today’s hearing, the Additional Solicitor General (ASG) N Venkatraman argued that the government approached the Supreme Court in the case as the High Court relied heavily on a judgment of a two-judge bench of the same court. 

According to the ASG, the observations made by the HC in the judgment have put a pause on other show cause notices leading to a problem for the GST department. He argued that the department has had to hold back at least 35 different show cause notices owing to the HC’s judgment.

The Gameskraft Case

In September 2022, the Directorate General of GST Intelligence (DGGI) issued a show cause notice to Gameskraft, alleging that the online gaming startup failed to pay INR 21,000 Cr 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 was also accused of promoting online betting through cards and casual and fantasy games such as Rummy Culture, Gamezy and Rummy Time. Gameskraft was not issuing invoices to customers, the officials alleged at the time.

GST officials slapped a 28% tax on betting amounts of nearly INR 77,000 Cr. “GTPL (Gameskraft) was engaged in the betting by allowing its players/gamers to place bets in the form of money stakes on the outcome of card games played online,” the authorities said.

The authorities alleged that the gaming platform submitted fake/back-dated invoices and added that it was inducing its customers to bet as there was no way of returning the money once it was added to the wallet.

The company approached the Karnataka High Court challenging the show cause notice. In May 2023, the High Court quashed the show cause notice and observed that the department was picking and choosing its arguments. Following this, the GST department appealed against the judgment in the Supreme Court.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.