[Online Gaming] GST notice issued despite Karnataka High Court stay: Gameskraft moves HC against ₹21,000 crore demand

Online gaming intermediary Gameskraft Technologies has moved the Karnataka High Court against a show-cause notice issued by the Directorate General of Goods and Services Tax Intelligence (DGGI) despite the High Court’s stay on a previous ₹21,000 crore tax notice issued to the company..Gameskraft was issued an intimation notice from the GST authorities on September 8 raising a demand of ₹21,000 crore, which was challenged before the High Court.Justice SR Krishna Kumar had on September 23rd stayed this notice, observing that there were several contentious issues in the case.“If the same is not stayed, the petition would be rendered infructuous and as such, I deem it just and appropriate to stay the impugned Intimation pending disposal of this petition”, the single-judge had stated..However, the online gaming company claims that despite this stay order, the authorities illegally, contemptuously and maliciously issued the show cause notice on the very same day as the High Court’s order.The petition also highlights that Ramesh Prabhu, Chief Financial Officer of the company himself was levied with a personal penalty..The petition argues that the allegations in the GST authorities' show-cause notice were exactly the same as those in the intimation notice which had already been stayed.“Given the main proceedings are already stayed, the action of the Respondents in the present ought to be stayed since it is a flagrant violation of this Court’s order," the plea argued..Further, it was submitted that the issue of taxability of online gaming was pending consideration before the GST Council for more than three years. In this light, the authorities had erred in alleging that the gameplay facilitated by the petitioner was taxable at 28 per cent.“It is further submitted that the Respondents have acted in haste in issuing the Impugned SCN inasmuch as the taxability of the online gaming is being deliberated upon in the GST Council and till any decision is reached, proceedings ought not be initiated against the petitioner.”.The petition also points out that the Respondents' entire case was built on the erroneous surmise that the activities undertaken by Gameskraft were an actionable claim and not a service.."The allegation that the Petitioner were engaged in betting in the guise of Rummy, goes against all the settled principles and jurisprudence with respect to betting/gambling," the plea reads..In this regard, it was submitted that if interim relief was not granted to the petitioner, it would cause irreparable loss of goodwill and reputation. Therefore, the show-cause notice was sought to be stayed. ....First marked at ₹419 crore... However, this increased to ₹5,000 crores, and ultimately to over ₹21,000 crores after July 2022Petition.The issue stems from a raid conducted by the GST authorities on Gameskraft's office in November 2021, which culminated in an order by which all the company's bank accounts were attached.Pertinently, the quantum of amount alleged to be evaded by Gameskraft was at first marked at ₹419 crore. However, this increased to ₹5,000 crores, and ultimately to over ₹21,000 crores after July 2022 when the respondents changed their narrative and began to allege that Gameskraft might be indulging in betting."It is submitted that the aforesaid averments of the Respondents would itself depict that the course of investigation had suddenly changed mid-way," the petition contended. .Gameskraft was represented by Senior Advocate Udaya Holla along with Advocates Siddhartha HM, Siddharth B Muchandi, Vyasakiran Udadhya, Suhaan Mukerji, Varun Thomas Mathew and Nikhil Parikshith.Additional Solicitor General N Venkataraman appeared for the GST authorities..'Is Big Brother watching?'.The hearings before the High Court saw ASG Venkataraman making unyielding submissions on behalf of the GST authorities. The vehemence of the ASG's arguments prompted Justice Kumar to question whether 'Big Brother' was watching over the case.Initially, the ASG gave the Court an assurance that no coercive action would be taken on the notice issued to Gameskraft. However, on the next date of hearing, he said that he had no control on that aspect..[Read the September 23 order]