Will move Supreme Court against Karnataka HC’s order on online gaming: Revenue Secretary

After a massive backlash from online gaming companies, Revenue Secretary, Sanjay Malhotra told CNBC-TV18 that the GST council’s decision has just cleared the air on the 28 percent tax.

Malhotra said that the online gaming companies were paying 18 percent GST based on Karnataka High Court’s decision in 2022 and that the department will challenge that decision in the Supreme Court.

Sanjay Malhotra told CNBC TV-18 that the department has always been clear that the GST on online gaming companies has been 28 percent on face value.

“The rate to our mind has always been 28 percent on the full value and not just the Gross Gaming Revenue. Gaming companies have been charging 18 percent GST due to the court case we lost. We will be challenging that verdict this month,” said Revenue Secretary, Sanjay Malhotra.

Sanjay Malhotra also said that the department will be filing an SLP (Special Leave Petition) in the Supreme Court this month and the amendment to the GST law will most likely be brought in the monsoon session of Parliament.

Twenty-eight percent GST on full face value has already been in effect wrt online gaming; the question of retrospective taxability doesn’t arise, he added.

“The revenue from online gaming companies stood at Rs 1,700 crore last year, if we win the case, this number might go up five to 10 times or even more,” Revenue Secretary told CNBC -TV18.

In May this year, the Karnataka High Court issued an order regarding Gameskraft Technologies Private Limited, which had received a GST notice for Rs 21,000 crore. The court quashed the notice and clarified that online games that are primarily skill-based are not taxable under the 28 percent slab of GST.

The court referred to several previous cases, including M.J. Sivani and Ors. v. State of Karnataka, Dr K. R. Lakshmanan v. State of Tamil Nadu, and All India Gaming Federation v State of Karnataka & Ors, among others.

Gameskraft Technologies Private Limited moved the Karnataka High Court after it received a GST notice for Rs 21,000 crore from the Directorate General of GST Intelligence (DGGI) in September 2022.

The notice was issued for the period between 2017 and June 2022, alleging that the company failed to pay GST on the betting amount. The DGGI estimated that the face value of the total bets during this period stood at Rs 77,000 crore. The authorities levied a 28 percent tax on the betting amount, which led to the total amount ballooning to Rs 21,000 crore.