Over 100 Online Gaming Companies Could Face GST Evasion Investigations

Authorities are preparing to launch investigations against more than 100 new online gaming businesses, according to recent reports, as part of a strategic move targeted at reducing tax fraud within the online gaming industry.

Following the Supreme Court’s intervention, the Karnataka High Court’s order to throw down the GST department’s intimation notice—which demanded a sizeable amount of Rs. 21,000 crore from an online gaming platform—was reversed.

A response has been requested in relation to a complaint made by the Directorate General of Goods and Services Tax Intelligence about Gameskraft, a Karnataka-based online gaming platform. The bench consisting of Chief Justice D Y Chandrachud, Justices J B Pardiwala, and Manoj Mishra issued the summons.

There are more than 100 businesses registered with local online gaming federations, said a senior official. To find out whether there has been any GST avoidance, we want to carefully examine these firms’ business practices. The official went on to make it clear that only businesses involved in dealings with the gambling industry would be under scrutiny.

“Out of these 100 companies, not all participate in real money online gaming,” the source said. Our main emphasis will be on companies that provide such games.

The beginning of this issue may be found in an intimation notice that Gameskraft got from the GST authorities on September 8 of the previous year, requesting a staggering amount of Rs. 21,000 crore. The corporation then appealed the notification before the high court.

On September 23, 2022, a single judge on the high court suspended the GST department’s notice due to many controversial concerns that were linked with the case. This was a major step.

Gameskraft, however, found itself back in front of the high court, claiming that notwithstanding the stay order, the government had unfairly and intentionally sent a show-cause notice on September 23, 2022, the same day as the high court’s decision.

The company’s financial transactions were to be subject to a 28 percent GST under the notification from September 8, 2022.

Gameskraft released a statement in reaction to the current situation, saying, “We have taken notice of the temporary injunction issued by the Supreme Court. We will bring our cases before the Supreme Court in the next weeks in conjunction with reputable groups from the gambling sector.

The rest of the statement reaffirmed its trust in the legal system, adding, “We hold full confidence in the judiciary and believe that the Supreme Court will once again uphold established legal principles spanning over five decades, thereby vindicating both our stance and that of the industry.”