The Karnataka High Court on Thursday overturned an order by the Directorate General of GST Intelligence (DGGI) imposing a ₹21,000 crore goods and services tax demand on Bengaluru-based Gameskraft, offering relief to online gaming firms.
Lawyers and gaming industry executives welcomed the verdict, stating that the ruling will serve as a precedent for online gaming startups across India and also as a reference point for the GST Council meeting next month.
DGGI sent a show-cause notice to Gameskraft on 8 September, alleging the gaming startup misclassified its offerings as a service instead of filing for actionable claims, which leads to a difference of nearly 40 times in the total quantum of tax liability for the company. While online games of skill, which qualify as a service, are taxable at 18% on the total margin earned by a gaming platform as commission, DGGI’s notice claimed that Gameskraft’s offering qualified as a game of chance and was thus to be taxed at 28% of the entire revenue (and not just income) of the firm.
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