SC Stays Order Quashing GST Notice Against Gameskraft

Recently, the Supreme Court issued a stay on the Karnataka High Court’s judgment setting aside the GST show cause notice issued against the online gaming company, M/s. Gameskraft Technologies Private Limited.[1]

The said notice was issued on September 23, 2022, to Gameskraft for failing to make payment of tax to the tune of Rs. 21,000 Crore with respect to online rummy games played on its platforms. Holding that such games are “substantially and preponderantly” games of skill and not of chance, the Karnataka High Court dismissed the argument that they were taxable as ‘Betting’ and ‘Gambling’. The court proceeded to set aside this show cause notice in May 2023, deeming the same to be “illegal, arbitrary and without jurisdiction or authority of law”.

The present special leave petitions have been filed challenging the said decision of the Karnataka High Court. One of the paragraphs of the said judgment wherein the tax authorities were reprimanded for their attempt to “cherry pick stray sentences” from Court judgments and “try to build up a non-existent case out of nothing which clearly amounts to splitting hairs and clutching at straws” has been flagged. Further, the petitioners cited the Apex Court’s decision in Skill Lotto Solutions Private Limited v. Union of India & Ors.[2] in support of their contentions.

The matter will be heard next on October 10, 2023.

[1] Directorate General of Goods and Services Tax Intelligence (HQS) & Ors. v. Gameskraft Technologies Private Limited & Ors. [SLP(C) Nos. 19366-19369/2023]

[2] (2021) 15 SCC 667