Background Matrix

The matter issue stemmed from a raid by GST authorities on Gameskraft’s office in November 2021, which culminated in an order to freeze all the company’s bank accounts. Appropriately, the amount of money allegedly diverted from Gameskraft must have been there from the beginning. the value is 419 crore. However, it rose to ₹5,000 crore and then more than ₹21,000 crore after July 2022 when the accused changed his story and started claiming that Gameskraft might have been engaged in betting. Gameskraft was issued an intimation notice from the GST authorities in September raising a demand of ₹21,000 crores, which was challenged before the High Court.

Argument Advanced 

The online gaming company claimed that Ramesh Prabhu, the CFO of the company itself, was personally punished and hence imposing additional penalties on gaming platforms is an ultraviolet act.

The petition claimed that the allegations made in the show cause notice of the GST authorities were the same as in the show cause notice which had already been delayed. They further argued that since the trial of the main case has already been adjourned, the present suit by the defendants should be adjourned as it is in a flagrant violation of the order of the Court. It was claimed that the taxability of online games was pending in the GST Council for more than three years. The filing also noted that the defendant’s entire case was based on the mistaken assumption that Gameskraft’s actions were actionable demand, not service.

Analysis of court order Karnataka High Court SR Krishna Kumar passed an order questioning the show cause notices issued later and set aside the show cause notice issued by the Directorate General of Goods and Services Tax to online gaming platform Gameskraft despite high tax rates. The court suspends the ₹21,000 tax return issued to the company earlier.

The Single Judge held that if the same is not delayed, the filing of the suit becomes futile and as such it was just and expedient to delay the impugned notification until the Single Judge decided to grant this application.

Prayer In the prayer seeking interim relief granted to the petitioner. The show-cause notice was sought to be stayed otherwise it would cause an irreparable loss of goodwill and reputation.