Bengaluru based online gaming company Gameskraft Technologies has challenged the Show Cause Notice (SCN), issued by the Directorate General of Goods and Services Tax Intelligence (DGGI) for a tax demand of over ₹21,000 crore, in the Karnataka High Court. It is expected to be taken up by the court soon.

Meanwhile, the company did not respond to queries from businessline about latest development. However, people aware of the matter confirmed that writ has been filed.

Game of chance

Last week, SCN was issued on the same day when the High Court granted interim stay over the preceding Intimation Notice (IN) issued in Form GST DRC-01A. This notice is the first step towards issuing a Show Cause Notice. 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 ₹77,000 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 ₹21,000 crore.

Two-tier structure

There is two-tier rate structure for online gaming — 18 per cent in case of game of skill and 28 per cent in case of game of chance. Most online gaming companies levy GST at 18 per cent, claiming it is game of skill. However, GST Department feels that it is game of chance. So, 28 per cent GST needs to be levied. In fact, the matter has been subjected to various writs and one such petition is pending in the Karnataka High Court itself.

This issue is been taking place at a time, when a Group of Ministers (GoM) is fine tuning its recommendations on GST rate and base for levying rates for online gaming, casinos and horse racing. It is also seeking legal advice. Earlier, it recommended uniform 28 per cent rate for all the three, but GST Council meeting, held in Chandigarh this June, found some differences and asked the GoM to rework on the recommendations. Once GoM finalises the recommendation, it will be taken up by the GST Council in its meeting scheduled to take place at Madurai for which date has not been fixed.

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