Rummy online becomes real business with Rs21,000 cr GST impost
27 Sep 2022
Bengaluru-based online gaming startup Gameskraft Technology has received a Rs21,000-crore tax demand from the Directorate General of GST Intelligence (DGGI) for evading taxes on a turnover of Rs77,000 crore.
Gameskraft Technology (GTPL), which runs several online games like Rummy Culture, Gamezy, Rummy Time, etc, refuted allegations claiming that it followed all rules.
"GTPL was engaged in the betting by allowing its players/gamers to place bets in the form of money stakes on outcome of card games played online," the tax authorities noted.
The DGGI has asked Gameskraft to pay GST at 28 per cent on a betting amount totalling Rs77,000 crore between 2017 and 30 June 2022, the biggest ever tax demand issued to any firm in connection with indirect tax evasion.
The GST notice came after a forensic examination by the DGGI revealing that Gameskraft did not issue any invoices to customers and submitted either fake or backdated invoices to the department. The probe also found that once a customer added money to their wallet, the firm did not allow the customer to quit.
Online gaming that doesn't require the application of any skill is taxed at 28 per cent and the taxable amount includes the winning amount as well.
The gaming firm, however, issued a statement claiming that Rummy has been recognised to be a skill game like horse racing, bridge and fantasy games and are therefore, legally protected activities as per the Supreme Court.
"As a responsible startup with Unicorn status in the online skill gaming sector, we have discharged our GST and Income Tax liabilities as per standard industry practice, which is now over a decade old. We are confident that we will be able to respond to this notice to the full satisfaction of the authorities since they have sought to apply 28 per cent tax applicable to games of chance and lottery, instead of the 18 per cent applicable to online platforms of games of skill," the company' spokesperson said.
"Games of skill are a constitutionally protected activity per the Supreme Court and various High Courts across the country. Rummy is one such game declared to be a skill game like horse racing, bridge and fantasy games. Therefore, the notice is a departure from the well established law of the land," the spokesperson added.
It refuted the claim of any violation of the GST and income tax liabilities. Gameskraft said that they will respond to the notice to the full satisfaction of the authorities.
Moneycontrol had last year reported that Gameskraft Technologies had bought five apartments in the city for around Rs32 crore, citing documents accessed by Zapkey.com.
The agreement of sale was registered on August 26, 2021. The five apartments, together worth Rs 31.49 crore, are of size 6,950 sq ft (super built-up area) each and are located in the Savyasachi Sarayu project on First Main Road, Jayamahal Extension, Bengaluru, according to the report.