Karnataka court seeks DGGI reply on Gameskraft plea

The unicorn gaming startup had filed a plea, on 26 September, against a show cause notice issued by the DGGI despite an earlier stay order by the court on an intimation notice. An intimation notice is issued by the department to inform a company of outstanding taxes, and it is usually followed up by a show cause notice.

The DGGI claimed that Gameskraft misclassified as a service while filing taxes, instead of actionable claims, which are taxable at 28%. The intimation notice was sent on 8 September. The court has now sought a response from the DGGI, a law enforcement agency under the finance ministry, on its initial demand and the show cause notice.

In a hearing on Tuesday, a bench led by Justice SR Krishna Kumar observed that it cannot issue a stay on the show cause notice served by the DGGI to Gameskraft, without hearing both parties adequately. The bench noted an appeal from N. Venkatraman, additional solicitor general (ASG) at the Supreme Court, who is representing the DGGI at the Karnataka HC, which highlighted that a stay order on the show cause notice is not imperative since the latter already gives Gameskraft 30 days to respond.

The DGGI counsel argued that the provisional attachment, which assessed GST duties of ₹21,000 crore from Gameskraft, is also valid till 10 November, which therefore doesn’t require an immediate verdict on either notice served by the DGGI to Gameskraft.

On 26 September, Gameskraft moved the high court against the DGGI for issuing the notice, despite the court issuing a stay order on the former’s GST demand intimation. According to Gameskraft’s petition, documents of which were seen by Mint, the notice was served despite a bench led by Justice Kumar issuing a stay order against DGGI’s demand from Gameskraft to pay GST)to the tune of ₹21,000 crore, plus interest and penalties.

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