SC stays Karnataka HC’s judgment quashing Rs.21,000 Crore GST notice issued to Gameskraft

The Supreme Court has delayed a Karnataka High Court decision that had rejected a goods and services tax (GST) notice against Bengaluru-based online gaming business Gameskraft Technology for suspected evasion of Rs.21,000 crore on Sept 06, 2023.

A bench chaired by CJI DY Chandrachud is expected to hear the case for the final time in three weeks.

At today’s hearing, Additional Solicitor General (ASG) N Venkatraman stated that they had sought the Supreme Court because the High Court had relied significantly on a judgement by a two-judge bench of the same court.

According to the ASG, the HC’s findings in the judgement have put a halt to further show cause notices, causing a headache for the GST department. He said that the HC’s decision has caused the department to halt at least 35 distinct show cause notifications.

After hearing the matter, the CJI asked Gameskraft to write their answer and allowed the Directorate of Revenue Intelligence of GST to make a rebuttal. The court also suspended the execution of the judgement, allowing the GST department to commence actions against Gameskraft. Furthermore, the Chief Justice stated verbally that the Supreme Court would not want any other High Court to adopt this ruling.

Joyjyoti Misra, Group General Counsel at Gameskraft, stated that the company, together with the skill gaming industry organisations, will file submissions with the Supreme Court in the coming weeks.

“We have complete faith in the judiciary and are confident that the Supreme Court will once again reaffirm the settled law of over five decades and vindicate our and the industry’s position,” he stated.

Case Details:

A GST intelligence unit filed a show-cause notice to Gameskraft Technology in September 2022, stating that the business failed to pay Rs 21,000 crore in GST, the largest such claim in indirect taxes history. The notification covered the period from 2017 through June 30, 2022.

Gameskraft Technology Private Limited (GTPL) was also charged with marketing online betting through card, casual, and fantasy games as Rummy Culture, Gamezy, and Rummy Time. According to authorities, Gameskraft was reportedly not providing bills to clients.

GST inspectors imposed a 28% tax on bets worth approximately Rs.77,000 crore. “GTPL was engaged in betting by allowing its players/gamers to place bets in the form of money stakes on the outcome of card games played online,” according to the police.

They claimed that the gambling platform filed fake/backdated invoices, which were discovered following a forensic investigation of the papers, and that the corporation also induced its clients to wager because there was no way to retrieve the money once it was placed to the wallet.

The corporation filed an appeal with the Karnataka High Court, disputing the show cause notice. The High Court overturned the show cause notice in May 2023, observing that the department was cherry-picking its reasons.

As a result, the Directorate of Revenue Intelligence of GST filed an appeal in the Supreme Court against this decision.

Gameskraft, which was founded in 2017, has a portfolio of real-money gambling platforms that includes the online rummy game Rummyculture and a multi-game platform Gamezy, which provides rummy, fantasy sports, and online ludo, among others.

For Official Judgment Download PDF Given Below: