In the wake of the Karnataka High Court’s recent verdict in the Gamescraft case, approximately 40 online gaming companies find themselves on the brink of receiving notices from the Goods and Services Tax (GST) Department. Two senior government officials have confirmed this development. Gamescraft Technology Private Limited (GTPL) had previously received a staggering notice from the government, alleging tax evasion amounting to Rs 21,000 crore. However, the Karnataka High Court had dismissed this claim. Nevertheless, on September 6, the Supreme Court intervened by staying the High Court’s decision. This pivotal judgment by the Karnataka High Court was handed down in May 2023.
Karnataka High Court Verdict Sparks GST Notices for 40 Online Gaming Firms
The notice received by Gamescraft stands as the most substantial claim in the annals of indirect tax history. In September 2022, the Intelligence Unit of GST issued a show cause notice to Gamescraft Technology. Currently, GTPL is among the 40 companies under scrutiny by the Directorate General of Goods and Services Tax Intelligence (DGGI) for alleged tax evasion.
Stay on Karnataka High Court’s Decision
According to a senior government official speaking to Moneycontrol, a considerable number of online gaming companies could expect similar notices. In fact, these notices were initially slated to be dispatched in relation to alleged GST evasion, but the Karnataka High Court’s order had temporarily thwarted the process. However, the latest development signals that these notices are now slated for delivery to the concerned companies.
40 Companies Investigated for Alleged Tax Evasion
Due to the similarity in activities between Gamescraft and other gaming companies, the GST Department refrained from issuing notices to the latter after the High Court’s decision. As per officials familiar with the matter, other companies also engaged in promoting online betting through money games from 2017 to June 30, 2022, without remitting the mandatory 28% tax.
GST Notices Deferred, Now Back in Motion
Additional Solicitor General N Venkatraman disclosed that following the Karnataka High Court’s decision, the Central Board of Indirect Taxes and Customs (CBIC) had put a halt to 35 show cause notices. So far, the department has dispatched only three notices: a staggering Rs 21,000 crore notice to Gamescraft and two more notices, each amounting to Rs 3,000 crore, to the remaining two gaming companies.
Another government official stated, “Show cause notices will also be issued to the remaining companies, as per the Supreme Court’s permission. DGGI is actively investigating other companies in connection with these matters.”
