GST authority send Rs 21,000 crore notice to rummy developer Gameskraft, as it bets against online gaming firms

India’s online gaming market brought in a revenue of more than Rs 13,000 crore in 2021, showing that bans on games such as PubG haven’t dampened the spirits of gamers. Among these fantasy sports apps such as Dream11 and online rummy, previously called gambling platforms, have been cleared by courts as ‘games of skill’ rather than contests based on chance. But this has also increased the risk of higher taxes for online games, and a company which created digital rummy, ludo and poker, now faces a record penalty for tax evasion.

The Directorate General of GST Intelligence (DGGI) has issued a show cause notice to online rummy developer Gameskraft demanding penalties, taxes and interests worth Rs 21,000 crore. This is the largest GST notice ever, which accuses Gameskraft of evading taxes between 2017 and 2022. The Karnataka High Court has stayed the notice for now, and will hear the case after Dussehra.

More trouble ahead for online gaming?

It all started when GST authorities raided Gameskraft’s premises in December, and allegedly found tax evasion of Rs 460 crore before attaching their bank accounts and property. But the action against the rummy and poker firm is just the beginning, as DGGI is betting big against the entire online gaming sector. The authority is reportedly eyeing a Rs 2.5 lakh crore GST recovery from multiple online gaming apps, through a crackdown on the industry.

As the Bengaluru DGGI has turned up the heat against Gameskraft, the Supreme Court has agreed to hear Karnataka government’s appeal against the high court order against a law that barred betting via online games. Gameskraft has reportedly responded with the claim that they have discharged tax liabilities in line with industry standards.

The specter of higher taxes

The online gaming industry is also awaiting the decision of a government panel which may increase the GST on games of skill from 18 per cent to 28 per cent. So far games of chance along with betting and horse racing are charged 28 per cent GST, while the rate for games of skill, which cover rummy and fantasy cricket, is 18 per cent. Stakeholders are afraid that an overall hike in taxes for the industry may even force firms to shut down.