Interim orders passed by the court in the case of Gameskraft Technologies Pvt. would continue to be applicable till the pronouncement of the final verdict, said the High Court of Karnataka.
This is in light of the fact that the one-year period, provided under the interim order, comes to an end in November. It includes a stay on the intimation notice sent to the company, seeking payment of Rs 21,000 crore towards Goods and Services Tax.
Gameskraft is a gaming company headquartered in Bengaluru and is registered under the central as well as state GST laws. It allows users to play skill-based games against each other online and predominantly features the game of rummy.
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. It had sent a whooping Rs 21,000 crore show-cause notice to Gameskraft for the same.
According to the authority, the company is engaged in the sale of actionable claims and not provision of service as claimed by the company and is therefore liable to be taxed as such.
According to Additional Solicitor General N Venkataraman, who appeared on behalf of DGGI on Wednesday, 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 said.
In the present case, the player engaged in the game of rummy is engaged in two transactions. In the first transaction, a 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.
Further, the company is involved in the sale of “actionable claims” and not in the provision of services as claimed by the company, he argued.
It is engaged in the collection and dispensation of funds collected on the platform and is not a mere facilitator. This means that GST would be chargeable on the entire transaction amount and not just the amount accrued to the company.
The case will be next heard on Nov. 17.