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Gameskraft Slapped With A ₹20,989 Crore Tax Notice

An intimation notice dated 9th September 2022 has been issued to Bengaluru-based online gaming firm Gameskraft Technology Pvt Ltd. The notice raises a tax demand of ₹20,989 Crore for the period between August 2017 to June 2022.

The GST department stated that Gameskraft’s business activities involve betting and gambling. It also said that 100% face value of the bet is subject to tax under Rule 31A of the CGST Rules, 2017 at the rate of 28%.

Gameskraft Technology is an online gaming brand that offers card games, casual and fantasy games. Platforms like Rummy Culture, Gamezy, Rummy Time, etc. fall under Gameskraft’s umbrella. The tax notice further said that the company was not issuing invoices to the customers, and thus violated Section 15(3) of the CGST Act, 2017.

Upset by the notice, the online gaming brand approached the Karnataka High Court and filed a writ against the notice issued to them. The company claims that it has paid more than ₹1,500 Crore as GST to date.

In the plea, the company also said that the GST department in its notice has failed to appreciate the difference between ‘games of skill’ and ‘games of chance.’ Gameskraft further relied on the latest Madras High Court decision in the Junglee Games Private Limited vs. State of Tamil Nadu case as well as the decision of the Karnataka High Court in the All India Gaming Federation vs. State of Karnataka issued in February 2022. It is to be noted that both these decisions are currently challenged before the Supreme Court.

The company also counted on the Kerala High Court’s 2021 decision along with other decade-old cases on the ‘games of skill’ and ‘games of chance’ debate.

Senior advocate Udaya Holla represented Gameskraft while ASG N.Venkataraman argued for the department.  On hearing both sides, the Karnataka High Court bench consisting of Justice S.R Krishna Kumar in an order dated 23rd September 2022 issued an interim order putting a stay on the intimation notice. The case will now be heard after the Dussehra festival vacation.

Last year, Gameskraft had challenged a provisional order issued by the GST authorities freezing bank accounts in an alleged tax evasion by GamesKraft. The tax department had also raided the offices of Gameskraft in November 2021. Following the raid, the Bengaluru-based company challenged the 2021 provisional order which is reserved for orders by the same bench led by Justice S.R. Krishna Kumar.

The gaming company recently purchased five apartments, located in Bengaluru, which have an aggregate built-up area of 6,950 sq. ft. These were bought for nearly ₹22 Crore in the project Savyasachi Sarayu. In several cases in India, casino operators have to mandatorily pay 28% GST on the entire bet amounts. On the other hand, online skill games are charged at 18% GST.

To evaluate the GST issues, a Group of Ministers (GoM) was formed to examine the GST issues in the online gaming, casinos, and horse racing industry last year. The group is yet to submit its report to the council.

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