Supreme Court Stays Quashing of GST Case vs Gameskraft
12 Sep 2023
The Apex Court Doesn’t Want Other HCs to Follow Karnataka
In a hearing on September 6, a Supreme Court bench led by the Chief Justice of India (CJI) D. Y. Chandrachud ruled an interim stay on the Karnataka High Court’s recent decision to quash a show cause notice by the Directorate General of GST Intelligence (DGGI) against Gameskraft Technologies alleging the evasion of the record breaking ₹21,000+ crore ($2.52 billion).
As per media reports, the Chief Justice verbally expressed at the hearing that the Apex Court would not like the other High Courts to follow the decision of the Karnataka HC.
According to Additional Solicitor General (ASG) N. Venkatraman, the Karnataka HC order had caused GST enforcement to stop the work on no less than 35 separate show-cause notices. The SC bench order would allow the DGGI to temporarily continue its investigative actions until further directions are issued by the court.
The case will likely be heard again in three weeks, pending written submissions from Gameskraft and the DGGI.
“We have complete faith in the judiciary and are confident that the Supreme Court will once again reaffirm the settled law of over five decades and vindicate our and the industry’s position,” Gameskraft’s Group General Counsel Joyjyoti Misra stated.
A Changing Landscape
The development comes after the Indian Parliament adopted the amendments to GST legislation recommended by the GST council, eliminating the difference between games of skill and games of chance in indirect tax treatment.
In the meantime, the Karnataka Government is reportedly considering implementing the state-level GST amendments needed to levy online real money games at 28% GST on the full face value of deposits through an Ordinance.
The recently amended IT Rules brought a major overhaul to India’s framework for real money gaming. This change led the Supreme Court to direct the High Court of Andhra Pradesh to discard previous views. The court instructed the High Court to make a fresh evaluation of games like rummy and poker.
Union Finance Ministry Notifies GST Valuation Rules
The Union Government notified the CGST (Third Amendment) Rules, 2023. This notification came in response to the Finance Ministry’s concerns. The rules clarify how to treat deposits at casinos and online gaming platforms.
Per the new rules. Any refunds made from the website or casino to the player will not be eligible for a refund when depositing. Thus treating the total deposited amount as the taxable sales value.
“This shall effectively settle the ambiguity and uncertainty around this issue. However. Whether the mere deposit of money in a wallet qualifies as a supply is unclear.” Saurabh Agarwal, Tax Partner at EY, commented.
