On Wednesday, the Supreme Court issued a stay order on a Karnataka High Court decision that had invalidated the Goods and Service Tax (GST) department’s notice served to the online gaming company GamesKraft Technologies, demanding payment of Rs 21,000 crore in outstanding dues.
A three-judge panel, led by Chief Justice of India D Y Chandrachud, issued the stay order, effectively suspending the High Court’s ruling from May 12, 2023. The High Court proceedings revolved around the classification of online games on the platform, determining whether they should be categorized as games of skill, subject to a 19 percent GST rate, or games of chance, in which case a 28 percent GST rate would apply. GamesKraft argued that the majority of their games, primarily rummy, should be considered games of skill, citing previous legal precedents. Conversely, the GST department contended that rummy was a game of chance and should be taxed at the higher rate of 28 percent.
The High Court, through a decision by a Single-Judge Bench, upheld GamesKraft’s argument, stating that rummy, being predominantly a game of skill rather than chance, should not be considered gambling, even when played for stakes.
During the Supreme Court proceedings, Additional Solicitor General N Venkataraman, representing the GST Directorate, expressed concerns about the High Court’s ruling, asserting that it contradicted a constitution bench ruling and three other judgments of the Supreme Court. He also raised objections to what he referred to as the “condemnation” of the Directorate’s actions in the High Court’s decision.
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