India’s tax intel wing slaps $2.58bn notice on gaming company that runs online rummy

In what has turned out to be the biggest-ever show cause notice served by it, India’s Directorate General of GST Intelligence (DGGI) has asked a gaming company why it has failed to pay Goods and Services Tax (GST) amounting to USD 2.58 billion. The company on the receiving end is Gamesraft, an online gaming company based in the southern Indian city of Bengaluru, India’s IT hub, reported CNN News 18.

It is said to be the biggest amount of show cause notice issued in the history of indirect taxation. 

Gameskraft has been accused of promoting betting, an offence in India, through its games like Rummy Culture, Gamezy, Rummy Time, etc.

The company faces accusation of evading tax on betting amounts of USD 8.73 billion, says the report. 

DGGI is an apex intelligence organisation functioning under the Central Board of Indirect Taxes & Customs, department of revenue, Union ministry of finance, entrusted with the task of collection, collation and dissemination of intelligence relating to evasion of Goods and Services Tax across India.

DGGI found during the investigation that Gameskraft had not provided invoices for money its customers paid. Sometimes, even backdated invoices were provided.

The DGGI report mentioned by CNN News 18 says that the gaming company was inducing people to resort to betting as there was no provision to return money to the customer once he deposited it in the online wallet.

The report said that Gameskraft Technology Private Limited (GTPL) allowed its customers to engage in betting by letting them place money bets. It allowed betting on the card games that were being played online.

Gameskraft was founded in 2017 by a group of gamers.

Gameskraft e-mailed a statement to WION on September 26 explaining their stand on the matter. Here’s what the company 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. As a responsible start-up 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% tax applicable to games of chance and lottery, instead of the 18% applicable to online platforms of games of skill”

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