GST Authorities Label INR 21,000 Cr Show Cause Notice Gameskraft

40 Online Gaming Firms Likely To Receive Fresh Tax Demand Of INR 10,000 Cr Following 28% GST Decision

SUMMARY

Gameskraft has been accused of not paying GST on INR 77,000 Cr worth of transactions at a 28% rate

The show cause notice is for the period between 2017 to June 2022

While the authorities have levied a 28% GST rate, the company has stated that rummy is a skill game and invites only 18% GST rate

The Directorate General of GST Intelligence (DGGI) has issued the biggest ever show cause notice to Bengaluru-based online gaming startup Gameskraft Technology. The tax notice of INR 21,000 Cr alleges indirect tax evasion on a betting amount of INR 77,000 Cr between 2017 and June 2022.

The company has been asked to share back-dated invoices with the tax authorities. The DGGI has also alleged that the RummyCulture parent Gameskraft was not issuing invoices (or sending fake/backdated ones) to its customer on the betting amount.

Further, the amount in question is also contentious since the company has been accused of promoting online betting through card, casual and fantasy games. The GST council has levied a 28% GST on the betting amount that went through Gameskraft companies Rummy Culture, Gamezy and Rummy Time. On this, the company has stated that rummy is a skill game and hence invites only 18% GST.

The development was first reported by CNN News18.

“Gameskraft was engaged in the betting as it allowed users to bet money on the outcome of card games played online,” the report quoted GST authorities.

A Gameskraft spokesperson, on the other hand, has called the move a “departure from the well-established law of the land”. The spokesperson also stated that the company has discharged its GST and income tax liabilities “as per standard industry practice”.

“We are confident that we will be able to respond to this notice to the full satisfaction of the authorities since they have sought to apply 28% tax applicable to games of chance and lottery, instead of the 18% applicable to online platforms of games of skill,” the company spokesperson said.

While this is the biggest show cause notice to date, the GST Intelligence team has previously also sent notices to 11 of India’s leading cryptocurrency exchanges for tax evasion worth INR 81.54 Cr. In 2021, Ola and Uber also faced GST evasion charges to a total tune of INR 1,000 Cr, whereas Flipkart’s logistics arm Instakart was also accused of using fake GST invoices.