Begin typing your search above and press return to search.
News Updates

Experts Have To Decide Nature Of Game, What Does Tax Officer Know?: Karnataka High Court Query In Gameskraft Hearing Against ₹21,000 Crore GST Notice

27 Oct 2022 11:52 AM GMT
BJP,  Shivajinagar Assembly Constituency, Electoral roll, Election commission

The Karnataka High Court Thursday observed the experts have to decide the nature of the game and not the GST officer, while hearing the online gaming platform Gameskraft's petition against the notice demanding Rs 21,000 Crore tax from it.

The tax has been demanded by Directorate General of GST Intelligence on the ground that activities being carried on Gameskraft is betting and amounts to game of chance.

During the hearing of Gameskraft's, Justice S.R. Krishna Kumar asked whether the notice provides the reasons for declaring the activity of Rummy by Gameskraft a 'game of chance'.

"We will look at that," said the court.

When Additional Solicitor General N. Venkataraman, who represents Directorate General Of GST Intelligence (Headquarters), said elaborate reasons have been given in the notice, the court said, "Are you competent, first of all. How are you... the experts have to decide the nature of the game, not the officer. What does officer know? I am just saying".

Senior Advocate Abhishek Manu Singhvi earlier made submissions on behalf of Gameskraft and took the court through various judgments on the question of skill versus chance in gaming. The hearing will continue on Friday.

Gameskraft is headquartered in Karnataka and is involved in hosting of skill based online games on its platform as an intermediary and game of Rummy constitutes more than 96% of the games played on its platform. Arguing that the games being played on its platform have already been held to be games of skill and not games of chance, the company has said the impugned Intimation notice dated September 08 is arbitrary and violative of law. It has prayed the department be restrained form levying GST at the rate of 28 percent.

During the hearing, the bench observed that if it comes to conclusion that it is settled by apex court and high court division bench that it is a game of skill, "that is end of this".

The court on September 23 had stayed the intimation notice demanding a total GST of Rs 21,000 Crores (plus interest and penalty). "It is made clear that this interim order is restricted and limited to the impugned Intimation ... dated 08.09.2022 and without prejudice to the rights and contentions of the parties in any other matter, pending or otherwise and also without expressing any opinion on the merits/demerits of the rival contentions and the same are kept open," the court said.

According to the company, it has paid more than INR 1,500 crores as taxes to the Government exchequer (as Income tax and GST) till June, 2022. "The impugned intimation alleging that the petitioner is involved in the supply of an actionable claim which is contrary to the material on record which establishes that there was no such actionable claim and that any actionable claim was only between the players in respect of which, the petitioner did not have any claim or beneficial interest," it has argued.

Even an actionable claim was not taxable under the provisions of CGST Act and that the same would become taxable only if they relate to betting, gambling or lottery, all of which were not being done by the petitioner, the company has told the court.

"The games being played on the petitioner's platform have already been held to be games of skill and not games of chance by the Division Bench of this Court in the case of All India Gaming Federation and others vs. State of Karnataka and others – 2022 SCC Online KAR 435, to which the petitioner was a party and even in the petitions filed before the Apex Court challenging the said judgment, there is no order of stay or any other interim order and consequently, the said judgment of the Hon'ble Division Bench continues to remain in force in favour of the writ petitioners in the said petitions including the petitioner herein and as such, the impugned Intimation which proceeds on the basis that the activity being carried on by the petitioner is betting and a game of chance deserves to be quashed," Senior Advocate Udaya Holla has argued earlier for the petitioner.

It has also been argued that the impugned notice suffers from lack of jurisdiction since it was not been issued by the proper officer as is required under law. "The impugned notice is vitiated with malice, both on facts and law and is arbitrary and violative of Articles 14, 19 and 21 of the Constitution of India...," the plea contends.

If the demand is enforced, "not only would the petitioner suffer loss of business and reputation but also lead to irreparable injury and hardship to the petitioner and justice would suffer," Gameskraft has said.

Senior Advocate Mukul Rohtagi, who appeared for an intervenor - a federation of gaming apps, on Thursday said they support the petitioner. Senior Advocate Arvind Datar also appeared for another intervenor.


Next Story