Exclusive: Govt files appeal against Karnataka HC decision in GamesKraft Rs 21000 crore GST matter

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The Central Government through Director General of Goods and Services Tax Intelligence has approached the Supreme Court challenging the Karnataka High Court decision quashing INR 21,000 crore tax notice against GamesKraft.

The GST department had initiated the action against skill gaming operator GamesKraft last year and the gaming company soon filed a plea with the Karnataka High Court seeking to quash the notice in which the decision was delivered in May 2023.

Through a voluminous appeal document (including annexures) running into more than 700 pages, the revenue department argued that betting/gambling is not dependent on the underlying nature of the game. The revenue argued that game of skill with stakes cannot escape from being declared as betting or gambling.

The revenue department has also referred that the show cause notice adealt with ineligible deductions in the form of bonus, incentives, and instant cash which the Karnataka High Court quashed without any discussion. The tax involved on this is around INR 450 crores read the appeal petition filed through advocate Mukesh Kumar Maroria.

Through the appeal, the revenue also sought deletion of certain parts of Karnataka High Court decision permanently from the record. The Karnataka High Court in the decision opined that the case is an outcome of a vain and futile attempt to cherry pick stray sentences from decisions of Courts and build a non existent case. The revenue submitted that such a stricture is uncalled for and sought permanent deletion from the records.

The appeal has currently been allocated a diary number with the revenue required to rectify certain defects within 90 days for it to be allotted SLP number and a subsequent listing.

Law firms PLC Chambers, Keystone Partners, and Lakshmikumaran & Sridharan have filed caveats on behalf of the respondent company and other parties. A caveat acts as a formal notice wherein the respondents will always be intimated before any legal action is instituted.

The GST Council in a meeting on 11 July and 2 August has clarified the tax rate for online gaming as 28% on deposit amount effective from 1 October. However, the department has on numerous occasions informed that this is only a clarification of existing provision and it will continue to pursue tax matters before judicial authorities.

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