Dream11 parent moves Bombay HC challenging GST evasion notice

In FY22, Dream11 posted a net profit of Rs 142 crore on operating revenue of Rs 3,841 crore.

Dream Sports, the parent company of Dream11 (Sporta Technologies Private Limited), has filed a writ petition in the Bombay High Court challenging a show cause notice issued by tax authorities for alleged goods and services tax (GST) evasion and non-payment of 28 percent GST on the face value of bets, people with knowledge of the matter told Moneycontrol.

According to sources, the tax claims in the show cause notice are notably higher than the Rs 21,000 crore claim against Gameskraft, making it one of the largest claims in the history of indirect taxation.

Further, sources added that the claims against the Mumbai-based firm, Dream Sports, could be nearly double the amount initially reported, amounting to around Rs 40,000 crore. However, The Economic Times estimates the amount to be Rs 25,000 crore. Dream Sports declined to comment on this development.

Fantasy sports major Dream11 posted a net profit of Rs 142 crore on operating revenue of Rs 3,841 crore in FY22.

Earlier this month, Moneycontrol reported that the Central Board of Indirect Taxes and Customs (CBIC) is likely to send showcause notices to over 40 skill-gaming companies for alleged tax evasion after the Supreme Court stayed a Karnataka High Court judgment, quashing a GST notice against Gameskraft for alleged tax evasion to the tune of Rs 21,000 crore.

Supreme Court is set to hear the matter again in the coming weeks. Skill gaming executives and legal experts have previously told Moneycontrol that any unfavourable ruling from the apex court could be the final nail in the coffin for the skill-based gaming industry that is already reeling under the GST Council’s recently announced 28 percent GST regime.

In July 2023, the GST Council decided to impose the top GST slab of 28 percent on the full face value, irrespective of whether it is a game of skill or chance. On August 2, it provided partial relief by recommending that GST be levied on deposits instead of every bet placed, in order to avoid repeat taxation.

Skill gaming platforms currently pay 18 percent GST on the platform fees, also known as Gross Gaming revenue (GGR)

Revenue Secretary, Sanjay Malhotra, however, had mentioned that GST rates on real-money gaming were always 28 percent on full face value and this amendment was only clarificatory in nature.

The council, headed by Finance Minister Nirmala Sitharaman, has asked all states to implement the new tax rates by October 1, 2023. It also agreed to review this decision six months after implementation.

On August 11, the last day of the Monsoon Session, Sitharaman introduced bills to amend the Central and Integrated GST laws and it was passed in both Lok Sabha and Rajya Sabha. President Droupadi Murmu also gave her assent to the amendments on August 19.

Subsequently, states such as Haryana, Goa and Arunachal Pradesh have passed similar amendments to their respective state GST laws.