In this blog post, we'll discuss a significant decision by the Karnataka High Court that brings relief to online gaming platforms facing a substantial GST demand notice. Let's delve into the key findings and implications of this ruling.
Background:
The Goods and Services Tax (GST) rate for "games of skill" is 18%, while "games of chance or betting" attract a rate of 28%. In September 2022, the GST Intelligence unit issued a notice to a platform company, claiming an astounding tax demand of INR 21,000 crore. The notice alleged that the platform company should be taxed at the higher rate of 28%, considering the games offered as "games of chance or betting" rather than "games of skill." In response, the platform company challenged the tax demand notice, leading to the case reaching the Karnataka High Court.
Key Findings:
Predominance of Skill: The court acknowledged that games like rummy predominantly require the application of skill to control the outcome, rather than relying on mere chance or luck.
Absence of Forecasting or Predicting: The court emphasized that games of rummy do not involve the activity of forecasting or predicting the winner. The element of skill in the game is focused on controlling the outcome through strategic decisions.
Interpretation of Betting and Gambling: The court clarified that the terms "betting" and "gambling" mentioned in Entry 6 of Schedule III of the Central Goods and Services Tax (CGST) Act do not encompass games of skill. The court recognized that games of skill are distinct from games of chance and cannot be considered betting or gambling.
Predominant Element: While acknowledging that games of skill may involve an element of chance, the court highlighted that the crucial factor to determine whether a game is primarily a game of skill or chance is the predominant element.
Conclusion:
In a significant ruling, the Karnataka High Court has quashed the INR 21,000 crore GST demand notice imposed on the platform company. The court emphasized that when the outcome of a game depends substantially or preponderantly on skill, staking on such games does not amount to betting or gambling. This decision brings much-needed relief to online gaming platforms and reinforces the distinction between games of skill and games of chance in the context of GST taxation.
Stay tuned for more news and analysis on taxation matters, and remember to check back regularly for new updates and insights.
Comments