Dream 11's Rs 18,000 Crore GST Challenge: Gaming Industry Braces for Rs 1 Lakh Crore Tax Notices
The online gaming industry is facing a fresh wave of challenges, this time in the form of multiple Goods and Services Tax (GST) notices and show-cause notices issued by tax authorities.
These notices allege that several online gaming companies have failed to pay their GST dues.
The Directorate General of Goods and Services Tax Intelligence (DGGI) has reportedly issued pre-show-cause notices to at least six such companies.
Among these companies, Dream 11, a prominent fantasy gaming platform, has been targeted with four such tax demands, totaling a staggering Rs 18,000 crore .
Dream 11's parent company, Sporta Technologies Private Limited, has chosen to contest these notices by filing a writ petition in the Bombay High Court.
The show-cause notice accuses the company of not paying the required 28 percent GST on the face value of bets collected between July 2017 and March 2022.
These notices also comprise a tax demand of Rs 6,000 crore, along with approximately Rs 12,000 crore in interest and penalty charges.
In their writ petition, Dream 11 argues against the imposition of differential GST, contending that the services they provide should not be categorized as gambling.
The company also challenges the notion that the notices and investigations seek to tax the entire Contest Entry Amount, branding this approach as 'arbitrary and unreasonable.'
According to insiders, more such notices are expected to follow suit, with intimation notices already dispatched to at least six other online gaming companies, including Games 24X7, a digital skill gaming company.
It is estimated that tax demands on the entire gaming industry could potentially exceed Rs 1 lakh crore.
Most of these notices are slated to be issued by the end of September. In cases where intimation notices have already been sent, companies have been asked to clarify their stance before final notices are issued.
Notably, these developments come on the heels of a Supreme Court decision that stayed a Karnataka High Court order.
The High Court had previously invalidated a show-cause notice by DGGI, which had demanded an additional GST payment of Rs 21,000 crore from Gameskraft.
Experts believe that this stay has emboldened GST authorities to issue similar notices to other gaming companies.
It is expected that the government will apply GST law uniformly to other gaming companies, much like what was done in the case of Gameskraft.
Consequently, all gaming companies will likely be required to comply with the law. Dream 11 has declined to comment on the ongoing matter.