Centre to file appeal on Karnataka HC quashing Rs 21,000-cr GST notice against Gameskraft: Revenue Secy

The Revenue Department will soon file an appeal in the Supreme Court against the Karnataka High Court ruling in May that had quashed a Rs 21,000-crore Goods and Services Tax (GST) demand against online gaming company Gameskraft. 

“We have lost the case in the Karnataka High Court. We plan to file a SLP (special leave petition) in the Court and hope to win. In the meanwhile, along with it, the Goods and Services Tax Council has also decided to make an amendment which is clarificatory in nature to amply make it clear that wagering on online games is also taxable at a higher rate,” said Revenue Secretary Sanjay Malhotra.

His comments, in an interview to Business Today, came after the 50th meeting of the GST Council on July 11 in which it decided that 28% GST would be levied on online gaming, horse racing and casinos on the full face value. 

The amendment to the GST Act is likely to be moved in the forthcoming Monsoon Session of Parliament, Malhotra further said. 

The decision of the GST Council has, however, disappointed the industry, which was hoping for an 18% rate on the platform fee. Industry players have said the higher GST on the full value could lead to many companies moving abroad. 

However, the Revenue Secretary said that the decision of the GST Council was unanimous.  “The tax has to follow certain principles of equity and fairness. It's also an instrument of social and economic policy,” he said. 

He also clarified that online gaming played for skill without wagering is taxed at 18%. It is only when online games that are either skill- or chance-based, when played with stakes on the outcomes of the game, would be taxed at 28% on the total face value. 

“The Council certainly felt that this activity of online games when played with stakes should attract a higher rate. It is not good for society, it is not good for the economy also, because it's sheer waste if done excessively and if one gets addicted, which they feel was the case, then it should be taxed at a higher rate both from social and economic perspective,” Malhotra said. 

When asked if it would act as a disincentive to the sector, he further said that employment and investments have to cater to the needs of society and what is good for the economy at large. “The needs of the society have to drive investments and not otherwise. And so, if the people continue to use online games, then there will be investments in the sector. But if at these tax rates, it does not find takers, then there will be lower investments,” he said. 

On whether the tax would be prospective or retrospective in nature, Malhotra said that the revenue department is of the view that even as per the present law, the rate of tax and the value on which the tax rate is to be applied are 28% and the full face value. 

“The amendment is only going to amply make it clear. So, while the amendment is prospective, it is clarificatory and makes it explicit that even online games where there is wagering are actionable claims under the purview of GST. It’s already at the same rate,” he said. 

GST on online gaming fetched about Rs 1,700 crore last fiscal.