There has been enough chatter in the gaming industry in regards to the new taxation policy which is yet to come to play. The taxation policy suggests a 30% TDS deduction from net winnings of any online games. As per the current taxation policy, online games which fall under the nature of betting or gambling or dependent on a certain outcome are required to pay a GST of 28% while games classified as games of skill or chance would be levied a GST of 18%.
Karnataka high court on Thursday quashed a show-cause notice of Rs 2,1000 crore issued by the Directorate General of GST Intelligence (DGGI) to Gameskraft, a Benagluru-based online gaming company. The DGGI issued a show-cause notice for the period between August 2017 and June 2022 to Gameskraft for alleged evasion of taxes while also being accused for online betting.
Speaking on the verdict, Joyjyoti Misra, group general counsel, Gameskraft, said,”We are very pleased with the verdict of the Karnataka High Court. It is a clear vindication of our business model. We had and continue to have full faith in the government and the judiciary. We are hopeful that this decision will pave the way for constructive dialogues with the GST authorities and will form the basis of progressive GST regulations for the industry.”
According to the autrhorities, Gameskraft Technology Private Limited (GTPL) promoted online betting through card, fantasy as well as casual games including the likes of Rummy Culture, Gamezy and Rummy Time. The gaming company had also submitted fake or back dated invoices, the authorities alleged.
The authorities also alleged that Gameskraft induced its customers to bet since the money could not be returned to its source after adding to the Gameskraft wallet.
The show-cause notice of Rs. 21,000 crore was one of the biggest claims under indirect taxation. According to Gameskraft, it is a skill-based gaming platform and should therefore attract 18% GST instead of 28%. The company added that it deducted a fee ranging from five to 15% of the contest entry amount while the rest was utilized as the players’ prize amount.
“This landmark decision by the Karnataka High Court which reiterates six decades of jurisprudence, will greatly aid gaming start-ups across India to work towards building the industry and ensure its healthy growth. We believe that a progressive and rational GST policy will boost investments within the sector,” said Roland Landers, CEO, All India Gaming Federation (AIGF).
Other gaming firms too feel that this verdict will make the journey to the road less travelled a tad easy. “Recognizing the online game of skill as an intermediary (and separate from gambling) brings a huge clarity further to recognizing these entities as service providers for taxes. The sector awaits GST clarity which stands as the biggest survival threat for the entire sector. The sector has over 1000 companies which are less than 24 months old and in the early revenue stages,” said Saumya Singh Rathore, co-founder, WinZO Games.