A view of the Karnataka High Court. File photo | Photo Credit: Srinivas Murthy V
In a major relief to companies offering online games of skill, the Karnataka High Court has ruled that online/electronic/digital games of skill and other online/electronic/digital games of skill are ‘betting’ and ‘gambling’. are not taxable under Central Goods and Services (GST) Act.
Bhavas, ‘betting’ and ‘gambling’ have become name of laware also applicable for the purpose of GST and consequently, the said words, ‘betting’ and ‘gambling’ contained in entry 6 of Schedule III to the CGST Act do not apply to online / electronic / digital rummy, whether played with be it with or without stake as well as for any other online/electronic/digital game which are also games of skill to a large extent,” the court said.
Justice SR Krishna Kumar made these observations in his judgment on a petition filed by Bengaluru-based Gameskart Technologies Pvt Ltd, an online gaming platform company.
GST Directorate has issued show cause notice
The company had questioned the show cause notice issued by the GST Directorate on September 23, 2022, alleging that the company was indulging in ‘gambling’ and levied GST at the rate of 28% on the entire amount paid by the players. had paid Games on your platform. The GST Directorate in its notice had alleged that the company had committed GST evasion of around Rs 21,000 crore.
The company was paying GST at the rate of 18% only on the platform fee and not on the entire money collected by players for playing rummy, and argued that being a game of skill, rummy did not fall under the definition. can be brought. of ‘betting’ and ‘gambling’.
Games of skill are beyond the purview of taxation of the term “supply” in view of Section 7(2) of the CGST Act, 2017 read with Schedule III of the Act, the court said while upholding the company’s contentions.
‘Gamble not a game of skill’
The Court held that the claims and arguments made on behalf of the GST authorities, “are the result of a futile and futile attempt on the part of the Respondents to pick sentences that deviate from the judgments of various Courts, including the Supreme Court, this Court”. and other High Courts and try to manufacture a non-existent case out of naught which clearly amounts to splitting hairs and clutching at straws which cannot be supported and is not permitted in law.
As the Courts have already held that Rummy and other games of skill, whether played in physical form or in digital mode, and whether played with or without stake, do not constitute gambling, Justice Kumar observed that ” The terms ‘betting’ and ‘gambling under entry 6 of Schedule III of the CGST Act’ should be given the same interpretation as given to them by the courts, and therefore ‘betting’ appearing in entry 6 of Schedule III of the CGST Act and The word ‘gambling’ is not and cannot include within its ambit a game of skill.”
The Court observed, “Though section 2(17) of the CGST Act considers contracts for betting to be included in the term business, it would not mean that lotteries, betting and gambling are the same as games of skill.”