With the Supreme Court (SC) staying the Karnataka High Court's (HC) judgment quashing a goods and services tax (GST) notice against Bengaluru-based online gaming company Gameskraft Technology for alleged tax evasion worth Rs 21,000 crore, the Central Board of Indirect Taxes and Customs (CBIC) is likely to issue a demand notice with penalty soon, three senior government officials said.
The SC had, on September 6, stayed the Karnataka High Court judgment, issued in May 2023.
“Now, the CBIC will adjudicate. The assessing commissioner will take a call. The assessing officer will send the tax demand. Why would there be a delay? The only reason it was held back was because of the Karnataka High Court order. The demand notice will be sent now with a penalty,” a senior government official told Moneycontrol.
A mail to the Union finance ministry for comments received no reply till the time of publishing the report.
What is the case?
In September 2022, a GST intelligence unit issued a show-cause notice to Gameskraft Technology Private Ltd (GTPL), alleging that the company failed to pay Rs 21,000 crore in GST, the biggest such claim in the history of indirect taxation. The notice was for the period between June 30, 2017, and June 30, 2022.
Gameskraft was accused of promoting online betting through cards, casual and fantasy games, such as Rummy Culture, Gamezy, and Rummy Time. Gameskraft allegedly was also not issuing invoices to customers.
The online gaming company had approached the Karnataka HC, challenging the show-cause notice. In May 2023, the HC quashed the show-cause notice and proceeded to observe that the department was picking and choosing its arguments. The revenue intelligence unit of the GST department thus appealed against this judgment in the SC.
“Gameskraft will be adjudicated, subject to what the SC has said. CBIC had challenged the HC. As of now, there is a stay. Let's see when it comes up in three weeks for the final hearing. Gameskraft has to file a rejoinder. The assessing officer will send a demand notice as per law,” another senior government official told Moneycontrol.
According to the GST Act, the penalty is 50 percent, if the payment for tax demand is made within 30 days of adjudication, after which 100 percent penalty is applicable.
Final hearing in three weeks
A bench led by the Chief Justice of India (CJI) DY Chandrachud is likely to take up the case for final hearing in three weeks.
The CJI has directed Gameskraft to file its response and permitted the revenue intelligence unit of the GST department to file a rejoinder to the same. Furthermore, the CJI has observed that the SC would not want any other HC following this order.
Joyjyoti Misra, Group General Counsel at Gameskraft, had earlier said that the company, along with the skill gaming industry associations, will put forth their submissions before the SC in the coming weeks.
Started in 2017, Gameskraft's portfolio of real-money gaming platforms include online rummy game Rummyculture and a multi-game platform Gamezy that offers rummy, fantasy sports, and online ludo, among others.
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