The gaming firm has claimed its games are skill-based and attract a GST of 18 percent, and not the 28 percent claimed by GST authorities.
According to senior DGGI officials, this is the biggest indirect tax claiming notice the GST's intelligence wing has served to any companies in the country so far. (Creative Commons)
Bengaluru-based online gaming firm Gameskraft has been slapped with a show-cause notice to pay ₹21,000 crore to the government. The firm allegedly evaded Goods and Services Tax (GST) for almost five years now.
The show-cause notice was served to the company — whose officers are in the 5th sector of HSR Layout, next to Devi Eye Hospital in Kadubeesanahalli, Southeast Bengaluru — by the Directorate General of GST Intelligence (DGGI) office on Saturday, 24 September.
According to senior DGGI officials, this is the biggest indirect tax claiming notice the GST’s intelligence wing has served to any companies in the country so far.
The DGGI, formerly called the Directorate General of Central Excise Intelligence, is an apex intelligence organisation functioning under the Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance.
This Central agency is entrusted with the task of collection, collation, and dissemination of intelligence relating to evasion of Goods and Services Tax, which came into effect in 2017 when the NDA government brought in the CGST and SGST.
According to sources from the GST office, online gaming company Gameskraft was registered on 6 June, 2017, with an authorised capital of ₹10 lakh and paid-up capital of ₹1 lakh.
However, since the company’s registration in 2017, it has to date conducted transactions to the tune of ₹77,000 crore by way of betting through its online games.
Gameskraft was supposed to pay 28 percent GST on the betting amount. However, the company has claimed the transactions invited only 18 percent GST as there is a difference in GST formats for skilled games and games of chance (like betting or horse racing).
The GST sources also said that the firm had been asked through the notice to share its backdated invoices with the GST authorities.
The DGGI also alleged that Gameskraft was not issuing invoices to its customers on the betting amount. It also accused the company of promoting online betting through card games, casual games, and fantasy games.
Before the show-cause notice was served on Gameskraft on Saturday, an intimation notice was sent by the DGGI to the gaming company.
The company’s legal cell has approached the Karnataka High Court and obtained a stay on the intimation notice served by the DGGI on Friday.
However, the DGGI served the show-cause notice to the company on Saturday, asking it to explain why action should not be taken against it for an alleged indirect tax evasion amounting to ₹21,000 crore.
A Gamskraft spokesperson, responding to South First, doubled down on the company’s stand that its apps were games of skill.
“Games of skill are a constitutionally protected activity per the Supreme Court and various high courts across the country. Rummy is one such game declared to be a skill game like horse racing, bridge, and fantasy games. Therefore the notice is a departure from the well-established law of the land,” the spokesperson told South First.
“As a responsible startup with Unicorn status in the online skill gaming sector, we have discharged our GST and income tax liabilities as per standard industry practice, which is now over a decade old. We are confident that we will be able to respond to this notice to the full satisfaction of the authorities since they have sought to apply 28 percent tax applicable to games of chance and lottery, instead of the 18 percent applicable to online platforms of games of skill,” the spokesperson added.
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