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The Karnataka High Court on Thursday quashed a show cause notice (SCN) of ₹21,000 crore issued to online gaming company Gamescraft. Now, Tax Authority is expected to reach Supreme Court.
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 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 ₹21,000 crore.
This ruling has come at a time, when GST Council in its meeting expected to take a call on GST structure for online gaming, Casinos and horse racing. Also, recently, government notified rules for online gaming.
Indirect Tax Partner of Khaitan & Co, Sudipta Bhattacharjee, who along with his colleague Onkar Sharma provided legal support to the petitioner in the matter, says the GST authorities sought to levy GST against entire online skill-gaming sector in India in a manner that is applicable only for companies indulging in ‘betting and gambling’, thereby obliterating the centuries old legally recognised distinction between ‘games of skill’ and ‘games of chance’.
“It is heartening to note that a position of law which has been settled for more than 60 years, that games of skill cannot fall under the ambit of ‘betting and gambling’ even if played for stakes, has not been deviated from,” he said.
According to Sameer Chugh, Chief Legal Officer with Games24x7, the legitimate online skill gaming platforms have been united as an industry in developing strong and ethical self-regulatory mechanisms and have been forthcoming in their commitment to running fully compliant businesses, operating by the laws of the land. “We are hopeful that the legal precedence set in this case will guide future discussions on economic and taxation policies pertaining to the skill gaming industry,” he said.
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