Order Date – 11 May 2023

Parties: M/s. Gameskraft Technologies Pvt. Ltd., Ramesh Prabhu, Mr. Prithvi Raj Singh, Mr. Vikas Tenjea, Mr. Deepak Jha Vs Directorate of Goods and Service Tax Intelligence (Headquarters), Additional Director General Director General of Goods and Service Tax Intelligence (Headquarters), Additional Director Goods and Service Tax Intelligence (Headquarters), Senior Intelligence Officer Directorate General of Goods and Service Tax Intelligence (Headquarters), Principal Additional Director General Directorate General of Goods and Service Tax Intelligence (Headquarters), Central Board of indirect Taxes & Customs and Others

Facts – 

• The Petitioner, M/s. Gameskraft Technologies Pvt. Ltd. (GTPL), an Online Intermediary Company incorporated in June 2017, who runs technology platforms that allow users to play skill based online games against each other and it has over 10 lakh users from across India.
• During the period between 11.11.2021 and 13.11.2021, the respondents – Revenue undertook search and seizure operations of the premises of GTPL, during which, various documents and devices were seized. The respondent also passed Provisional Attachment Orders attaching the Bank accounts.
• Subsequently, on 08.09.2022, respondents issued Intimation Notice to deposit a sum of Rs. 2,09,89,31,31,501/- along with interest and penalty by 16.09.2022 in which, this Court passed an interim order of stay dated 23.09.2022.
• Immediately thereafter, the respondents issued the impugned Show Cause Notice to the petitioner – GTPL as well as its Founders, CEOs and CFOs. Being aggrieved the petitioner filed the present petitions.

Issue – 

• Whether offline/online games such as Rummy tantamount to ‘gambling or betting’ as contemplated in Entry 6 of Schedule III of the Goods and Services Act, 2017?

Order – 

• The Single Bench of Hon’ble High Court observed that in a game of rummy, certain amount of skill is required because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards. Therefore, a game of rummy is a game of skill as held in Satyanarayana.
• There is a distinct difference between games of skill and games of chance; games such as rummy, etc. as was discussed in several decisions and particularized in the Division Bench decision of this Court in All India Gaming Federation’s case. Though Section 2(17) of the CGST Act recognises even wagering contracts as included in the term business, but that in itself would not mean that lottery, betting and gambling are the same as games of skill.
• The meaning of the terms “lottery, betting and gambling” as contemplated in Entry 6 of Schedule III of the CGST Act should be construed nomen juris in the light of the decisions of the Hon’ble Supreme Court, this Court and other High Courts which do not include games of skill.
• Entry 6 in Schedule III to the CGST Act taking actionable claims out of the purview of supply of goods or services would clearly apply to games of skill and only games of chance such as lottery, betting and gambling would be taxable. Taxation of games of skill is outside the scope of the term “supply” in view of Section 7(2) of the CGST Act, 2017 read with Schedule III of the Act.
• The expressions, ‘Betting’ and ‘Gambling’ having become nomen juris, the same are applicable for the purpose of GST also and consequently, the said words, ‘Betting’ and ‘Gambling’ contained in Entry 6 of Schedule III to the CGST Act are not applicable to Online/Electronic/Digital Rummy, whether played with stakes or without stakes as well as to any other Online/Electronic/Digital games which are also substantially and preponderantly games of skill.