Gameskraft GST Case: Interim Relief To Continue

The Karnataka High Court has allowed the interim relief to continue in the case of Gameskraft Technologies Pvt., which is facing a Rs 21,000 crore Goods and Services Tax liability. The interim relief, which would've ended in November, will now continue until the high court pronounces its final order.

At the heart of the matter is the tax rate that should be applied to online games, specifically rummy, offered on Gameskraft's platform. The company says it should be 18%—the applicable rate for games of skill. The Directorate General of GST Intelligence says the company's offerings qualify as games of chance, liable to be taxed at 28%.

Arguing for the GST department on Wednesday, Additional Solicitor General N Venkataraman, emphasised that a game becomes "a game of skill" only when the outcome of the game is based on skill. 'There should be a preponderance of skill'.

He elaborated that a user playing rummy on the Gameskraft platform is in two transactions. In the first transaction, the person is engaged in the game as a player. In the second transaction, the player engages in gambling by betting on the outcome of his game. The subsequent transaction qualifies as gambling and is illegal as per existing precedents, Venkataraman told the high court.

Further, the company is involved in the sale of "actionable claims" and not in the provision of services as claimed by it, he argued.

Actionable claim means a claim of any debt, and is exempted from GST. But actionable claim in the form of lottery, betting and gambling is subject to GST as per the existing law.

Headquartered in Bengaluru, Gameskraft allows users to play online games, predominantly rummy, against each other. The Directorate General of GST Intelligence in September had initiated a proceeding against Gameskraft for alleged evasion of tax by misclassification of its supply activity.

The high court will hear the case next on Nov. 17.