Gameskraft Case: Supreme Court Stays Karnataka High Court's Ruling

The Supreme Court stayed on Wednesday a Karnataka High Court's ruling that quashed a Rs 21,000-crore show-cause notice to Gameskraft Technologies Pvt. by the Directorate General of GST Intelligence.

Arguing for the department, Additional Solicitor General N. Venkatraman said that the stance taken by the high court goes against four previous judgements of the top court.

Venkatraman said that in a matter of five years, Gameskraft has collected Rs 70,000 crore as bet money from about 45 lakh players in the country. He said that the issue in this case is directly covered by a top court ruling, which says that once it is established that a game is played for stakes, it falls under the category of gambling and is therefore subject to GST accordingly.

Venkatraman further apprised the court that 35 other show-cause notices have also been kept in abeyance due to the high court's judgement.

While staying the judgement, CJI DY Chandrachud expressed that the court does not want other high courts across the country to follow the Karnataka High Court's ruling.

The case will now come up for hearing and final disposal after three weeks.

In September last year, the DGGI initiated a proceeding against Gameskraft for alleged evasion of tax by misclassification of its supply activity.

In May, the high court quashed the Rs 21,000-crore notice against the online gaming platform.

The point of contention before the high court was the appropriate tax rate for the platform's online games, especially rummy.

The company maintained that a tax rate of 18% is appropriate for a game of skill. The GST department, however, was of the view that the gameshould be subject to a 28% tax because, irrespective of the nature of the game, be it a game of skill or chance, the minute it is played with stakes, it amounts to betting or gambling.

The high court was not inclined to accept the department's contention, which led to the quashing of the show-cause notice.

Headquartered in Bengaluru, Gameskraft allows users to play online games, predominantly rummy, against each other.