The court's decision is rooted in challenges against Rule 31(A) of CGST Rules and Section 15(5) of the CGST Act presented in these petitions.
The court issued a rule in these petitions, filed by Delta Corp, saying that it wants the AG to submit the response on section 15(5) of the CGST Act to the court, which will hear the matter on February 5, 2024, for final disposal.
Experts feel that the response of AG in the next six weeks will be crucial given the fact that an SLP has been filed in SC by the Centre in a related matter of Gameskraft by the government.
Till now several demands have been raised by GST authorities involving -- ₹1,765 crore issued by the Hyderabad zone of DGGI, for the period between July 2017 and March 2022.
"The moot point before the court will be to determine the validity of the value of supply of actionable claim in the form of chance to win in gambling. The relevant rules provide that the value shall be hundred percent of the face value of the bet or the amount paid into the totalisator. However, this valuation overrides the statutory provisions which could tax the value of the consideration received by the service provider," explained Abhishek A Rastogi, founder of Rastogi Chambers, who had been instrumental in arguing in favour of online gaming and casino companies.
"The rules intend to tax that value of an actionable claim, which pertains to the amount between one participant to the other and ignores the fundamentals of the industry that when multiple persons gamble, one participant is not rendering any service to the other participant. The rule fundamentally goes wrong to assume that every activity is binary that is either a supply of goods or services," Rastogi added.
In a related matter, another show cause notice dated September 27, 2023 was issued by Sikkim GST Authorities, asking Deltin Denzong, Gangtok, Sikkim to pay ₹628 crore as Goods and Services Tax (GST) at the rate of 28% on the full face value of bets for the period July 2017-March 2022.
These notices are part of the larger set of show cause notices issued to the company and its subsidiaries in September-October 2023 totalling over ₹23,000 crore.
Directorate General of Goods and Services Tax Intelligence (DGGI) based on Rule 31A, which mandates that GST be charged on the full face value in case of chance to win in gambling and betting.
