Rummy is Predominantly a Game of Skill, not Chance; HC Quashes SCN Issued on Gameskraft

Case Details: Gameskraft Technologies (P.) Ltd. v. Directorate General of Goods Services Tax Intelligence - [2023] 150 taxmann.com 252 (Karnataka)

Judiciary and Counsel Details

• • S.R. Krishna Kumar, J.
  • Dr Abhishek Manu Singvi, Udaya Holla, Senior Counsels Siddhartha H.M., Suhaan Mukerji, Nikhil Parikshith, Abhishek Manchanda, Chandan Prakash Pandey, L. Nidhiram Sharma, Vyasakiran Upadhya, Varun Thomas Mathew & Onkar Sharma, Advs. for the Petitioner.
  • N. Venkataraman, Jeevan J. Neeralagi, Mukul Rohtgi, Senior Counsel Pradeep Nayak, Anupama Hebbar, Sankeerth Vittal, Karan Gupta, Aravind Datar, Sajjan Poovayya, Ms Raksha Agarwal, Sameer Sigh & Ravi Raghavan, Advs. for the Respondent.

Facts of the Case

The petitioner was running technology platform namely Rummy that allowed users to play skill based online games against each other. The department issued SCN to the petitioner whereby it had been alleged that the petitioner was involved in ‘betting/gambling’ & supply of ‘actionable claims’ and guilty of evasion of GST by misclassifying supply as services under SAC 998439.

It filed writ petition to challenge the impugned SCN and submitted that “games of skill” played with monetary stakes does not partake the character of betting. The main question for consideration in the petition was, whether offline/online games such as Rummy would tantamount to ‘gambling or betting’ as contemplated in Entry 6 of Schedule III of the Goods and Services Act, 2017.

High Court Held

The Honorable High Court noted that there is a distinct difference between games of skill and games of chance. The Court noted that a game of skill whether played with stakes or without stakes is not gambling and games such as rummy, etc. whether played online or physical, with or without stakes would be games of skill and test of predominance would apply. The 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.

Therefore, it was held that Online/Electronic/Digital Rummy game and other Online/Electronic played on the petitioner’s platform would not be taxable as ‘Betting’ and ‘Gambling’ and the Court also set aside the impugned SCN being illegal, arbitrary and without jurisdiction or authority of law.