BENGALURU: The Karnataka high court on Thursday quashed a Rs 21,000 crore show-cause notice issued to online skill gaming platform Gameskraft for alleged GST evasion.
Sameer Chugh, chief legal officer, of Games24x7, said the verdict is a reinforcement of the stand taken by the industry in following the existing GST framework under which it has been operating. “The pronouncement today (May 11), along with the recent progressive regulations in the online gaming sector including the notification of rules for online gaming by the Ministry of Electronics and Information Technology (MeitY) and the amendments to the Income Tax Act made through the Finance Bill 2023, helps to reinstate the demarcation between online gaming from games of chance involving betting and gambling,” Chugh said.
While GST authorities contended that the game qualifies as betting and it should attract 28% GST rate, Gameskraft said they are skill-based and subject to only 18% GST rate. The All India Gaming Federation believes that a progressive and rational GST policy will boost investments within the sector.
Sudipta Bhattacharjee, Partner, Khaitan & Co. said, “The GST authorities sought to levy GST against Gameskraft and in the last few months, against the 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 recognized distinction between ‘games of skill’ and ‘games of chance’.”
Bhattacharjee, one of the legal counsels for Gameskraft, said this is a historic judgement for the online gaming sector in India and it is heartening to note that a position of law, which has been settled for more than 60 years, that games of skill can’t fall under the ambit of ‘betting and gambling’ even if played for stakes, has not been deviated from.
The entire revenue of the online gaming industry in India was estimated to be in the range of Rs 16,000 cr- Rs 18,000 crore last year, and the GST demand on Gameskraft alone exceeded the entire revenue of the whole sector, Khaitan & Co said.
The investigation began in November 2021, and in September last year, the gaming platform challenged the notice by the directorate general of Goods and Services Tax(GST) Intelligence. The single judge had stayed the notice immediately. Initially, it was alleged that Gameskraft had evaded Rs 419 crore and subsequently, it was increased to Rs 5,000 crore and then to Rs 21,000 crore in 2022.
Big relief
Experts say entire revenue of online gaming industry in India was estimated to be Rs 16,000 cr to 18,000 cr last year
GST demand on Gameskraft (of Rs 21,000 cr) alone exceeded revenue of entire online gaming industry
This is long-drawn legal battle since the investigation started in November 2021
30% TDS deducted on winnings from online games
As per the amendment made in Finance Bill, 2023, TDS on online gaming has come into effect from April 1, 2023