Allegations of Tax Evasion
About 40 online gaming companies, including Gameskraft Technology Private Limited (GTPL), are under investigation for alleged tax evasion. It is claimed that these companies evaded paying a 28 percent Goods and Services Tax (GST) between 2017 and June 30, 2022.
Supreme Court Stay
The Supreme Court of India issued a stay on September 6, 2023, which allowed the Directorate-General of Goods and Services Tax Intelligence (DGGI) to send show-cause notices to these gaming companies. The stay came after the Karnataka High Court had earlier quashed a GST notice against GTPL for alleged tax evasion of Rs 21,000 crore in May 2023.
Biggest Tax Claim
The tax evasion claim against GTPL is described as the largest in the history of indirect taxation in India.
The DGGI is responsible for investigating these companies for alleged tax evasion. The investigation was temporarily halted following the Karnataka High Court's judgment but is now set to resume based on the Supreme Court's decision.
Since the activities of GTPL and other gaming companies are considered identical, the GST authorities had initially decided to hold back show-cause notices against other companies after the Karnataka High Court's order.
After receiving a notice in September 2022, Gameskraft Technology approached the Karnataka High Court, which quashed the notice in May 2023. However, the Directorate of Revenue Intelligence of GST appealed against this judgment in the Supreme Court.
Central Board Involvement
The Central Board of Indirect Taxes & Customs (CBIC) had put a pause on at least 35 show-cause notices to online gaming companies following the Karnataka High Court's judgment.
The DGGI will continue its investigations into other gaming companies following the Supreme Court's decision.
In summary, the legal battle revolves around allegations of significant tax evasion by online gaming companies in India. The Supreme Court's stay on the Karnataka High Court's judgment has opened the way for further investigations and show-cause notices to be issued to these companies by the GST authorities.