Supreme Court Issues Notice in Challenge to Verdict In 20,000 Cr Gameskraft Tax Evasion Case

The Supreme Court issued notice today in a challenge against the Karnataka High Court’s recent judgment quashing a Rs. 21,000 crore tax evasion notice against real money gaming major Gameskraft. Chief Justice of India D.Y. Chandrachud temporarily stayed the Karnataka High Court’s judgment pending further others. The case is likely to be heard again after three weeks.

Stay tuned for MediaNama’s summary of the challenges filed at the Supreme Court.

In the Karnataka case, the GST authorities that issued the evasion notice claimed that Gameskraft was offering ‘gambling games’ and should be taxed accordingly. This is despite the fact that Gameskraft offers online real money games like rummy—Indian courts have typically held rummy to be a game of skill, or a non-gambling game. The Karnataka High Court ruled in Gameskraft’s favour, holding that rummy was a skill game irrespective of whether it was played online or offline, or for stakes or not.

Article continues below ⬇, you might also want to read:

• Rs. 21,000 Cr GST Evasion Notice “Illegal, Arbitrary And Without Jurisdiction”: Why Did The Karnataka HC Rule In Favour Of Gameskraft?
• Gone In 60 Seconds: Karnataka HC Quashes GST Show-Cause Notice In Gameskraft Case
• Online Real Money Gaming Gets Equated With Gambling In Taxation

“It is also relevant to state that in the definition of wagering, the persons so doing should not have any interest in the outcome, which is completely contrary to the concept of game of skill, where the person playing the rummy is clearly interested in winning, which is also a circumstance to rule out the possibility of it being called a wagering contract,” the High Court observed. “The contention that it matters not whether the player or some third person is staking money is not apposite considering the fact that the person who stakes does so based on the confidence that he has on his skills and not his luck.”

While the GST authorities’ Supreme Court challenge seeks to overturn this verdict, it also comes after the GST Council’s recent decision to hike the GST rate for online games involving wagering from 18% to 28%. This move equates online skill games played for stakes with online gambling in taxation, which could complicate the Karnataka High Court’s ruling that these game types are distinct and should be taxed differently.

“We have noted the interim order of the Hon. Supreme Court,” said Joyjyoti Misra, Group General Counsel, Gameskraft in a statement to MediaNama. “We, along with the skilled gaming industry associations, will put forth our submissions before the Hon. Supreme Court in the coming weeks. We have full faith in the judiciary and are confident that the Hon. Supreme Court will reaffirm the settled law of over five decades once again and vindicate our and the industry’s position.”