On Tuesday, the Directorate General of goods and services tax Intelligence DGGI (Mumbai zone) sent out a notice against two popular online gaming companies, namely— Dream 11 and Play Games 24×7, penalising them for a sum of ₹28,000 crore and ₹21,000 crore respectively.
The notice comes soon after the action taken by the Maharashtra State GST audit authorities, who had issued a notice against Dream 11 asking for a sum of ₹18,000 crore. The online gaming industry was under the watch dogs radar and several so-called notices were sent to the company for what according to the tax watchdog is unpaid GST. and it was learnt that the gaming company dream 11 had earlier received approximately force similar tax notices until now, which are equivalent to a sum of 18,000 crore rupees. This sum comprises of a tax demand worth ₹6000 crore, and around ₹12,000 crore in penalty and interest. For now, we only know that dream 11 is coping with DGGI just sort out the case.
Allegations put by the DGGI
As per sources, the tax watchdog DGGI, accused the gaming company Dream 11 of irregularity based on wrong classification of what it deals in, online fantasy sport gaming. It claims that the company did not pay the necessary documents in spite of several notices sent by the DGGI.
The watchdog had begun probe against gaming company in September 2018. A detailed investigation of the same by the DGGI was carried out on September 14, 2023. At the time of investigation, gaming company submitted documents (form GST DRC 01 for Financial year 2017-18 and 2018-19) The that were issued by the state government of Maharashtra on 12 September 2023.
According to the information revealed by the company itself, final audit reports were notified by Maharashtra State authority on January 10, 2022 and January 6, 2023.
Source: The Economic Times
Retaliating to the notices, the company filed a writ petition in the Bombay High Court against the show cause notices which were received from the Maharashtra State GST audit authorities. According to current petition filed, the company claims that it had failed to pay 28% of GST on the face value of bets collected between July 20 17 and March 2022.
One of India’s biggest and successful online fantasy sports gaming platforms – dream 11, has found themselves caged in a complicated tax battle with state as well as central tax watchdogs.
The disagreement about dream 11 is around the accusation on the company that it was unable to submit the required documents in spite of several reminders.
In its writ petition, Dream 11 further argues that the notices want to assert this notion and get differential GST on the pretext that the services provided were that of gambling. The leading gaming company also questioned That the notices and proves lead to the tax and entire contest entry amount. Dream 11 has called this “arbitrary and unreasonable”. Sources revealed that there were orders
that the notices and probes lead to the tax and entire contest entry amount. Dream 11 has called this “arbitrary and unreasonable“. Sources revealed that there are many more similar notices to follow. such intimation notices have already been sent to 6 other online gaming companies that comprise digital skill gaming company, Games 24×7.
A tax intimation which is likely to be payable via the DRC – 01A form has been issued by the watchdog to the mentioned online gaming companies. Sources from the industry suggest that these tax demands throughout the industry could amount at more than ₹1 lakh crore.
It has been said that the government is likely on other gaming companies the way it had done in the case of GamesKraft, and the gaming industry will have to follow the law, according to the source. Until now, Dream 11 has refused to comment on the matter.
