Supreme Court Stays Quashing of GST Case vs Gameskraft

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 Gameskarft 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 other major overhaul of India’s framework over real money gaming – the recently amended IT Rules, led to the Supreme Court directing the High Court of Andhra Pradesh to scrape previous views and make a fresh evaluation of games like rummy and poker.

Union Finance Ministry Notifies GST Valuation Rules

In the face of the Finance Ministry, the Union Government notified the CGST (Third Amendment) Rules, 2023, clarifying the method of treatment of 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 of already paid GST 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 and may be challenged by industry,” Saurabh Agarwal, Tax Partner at EY, commented.