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In a significant ruling, the Karnataka High Court has dismissed a goods and services tax (GST) notice issued to Bengaluru-based online gaming company Gameskraft Technology.

The notice accused the company of evading Rs 21,000 crore in taxes, marking the largest claim of its kind in the history of indirect taxation. This verdict holds great significance for India’s skill-gaming sector, which has been eagerly awaiting clarity on GST regulations.

The case dates back to September 2022 when a GST intelligence unit served a show-cause notice to Gameskraft Technology Private Limited (GTPL), alleging that the company had failed to pay the aforementioned sum in GST between 2017 and June 30, 2022. Authorities also accused GTPL of promoting online betting through various games like Rummy Culture, Gamezy, and Rummy Time. Additionally, officials claimed that the company had not been issuing invoices to its customers.

GST officials levied a 28% tax on total bets worth nearly Rs 77,000 crore.

According to the authorities, GTPL facilitated betting by allowing players to place money stakes on the outcomes of card games played online. During the investigation, it was discovered that the gaming platform had submitted fake or backdated invoices. Moreover, officials alleged that the company induced customers to bet, as once money was added to the wallet, there were no means of returning it.

As per a Moneycontrol report, Gameskraft argued in defence that its offerings constituted skill-based gaming activities, which should only be subject to an 18% GST on the platform fee. The company stated that it deducted this fee from the entry fees paid by players, which typically ranged from 5-15% of the contest entry amount. The remaining funds were directed toward the players’ prize pool.

Joyjyoti Misra, the group general counsel of Gameskraft, expressed satisfaction with the Karnataka High Court’s verdict, describing it as a clear validation of its business model. The company expressed hope that the decision would foster constructive dialogues with the GST authorities and contribute to the development of progressive GST regulations for the industry.

Commenting on the verdict, Roland Lander, CEO of All India Gaming Federation, posted on Linkedin saying that this landmark decision by the Karnataka High Court will greatly aid gaming startups across India to work towards building the industry and ensure its healthy growth. 

Founded in 2017, Gameskraft Technology has made a name for itself in the realm of real-money gaming platforms. Its portfolio includes the popular online rummy game Rummy Culture and a multi-game platform called Gamezy, which offers a variety of games such as rummy, fantasy sports, and online ludo, among others.