Mumbai: Dream11, through its parent, Sporta Technologies have moved Bombay HC on Tuesday against the pre-show cause notice served by GST recently. The Directorate General of GST Intelligence (DGGI) recently sent out a dozen pre-show cause notices to online real money gaming (RMG) companies over goods and services tax dues of about Rs 55,000 crore. A GST notice of over Rs 25,000 crore to fantasy sports platform Dream11 is possibly the largest indirect tax notice served in the country.
The total GST demand raised by DGGI from RMG companies likely to touch Rs 1 lakh crore. An intimation of tax ascertained as payable through the DRC-01 A form is issued by the authorities. Called a pre-show cause notice in GST parlance, it is issued before the department serves a show cause notice.
Those served the pre-show cause notices include Play Games24x7 and its affiliates, and Head Digital Works.
The notices were issued after the recent change in GST rates for real money games increased the levy to 28% on the total bet placed at entry level of each gaming session on such platforms.
A similar notice seeking GST dues of Rs 20,000 crore has been issued to Play Games24x7 and its affiliates, including RummyCircle and My11Circle. A pre-show cause notice raising a demand of over Rs 5,000 crore has also been served to Head Digital Works.
Gameskraft Received Notice Of ₹21,000
Earlier a Rs 21,000 crore notice was sent to Gameskraft, which contested the levy in the Supreme Court. The apex court on September 6 stayed a high court order quashing the GST demand. On September 16, Gameskraft shut down its superapp Gamezy.
Play Games24x7 runs a variety of online games where users can wager on the outcome. Among the company’s major products are fantasy game My11Circle, a competitor of Dream11, and online platform RummyCircle, a competitor of Gameskraft game Rummyculture.
Hyderabad-based Head Digital Works runs a number of real money games, including A23 Rummy as well as poker, pool and fantasy sports.
Pre-Show Cause Notices Served
DGGI’s Mumbai unit alone issued around seven pre-show cause notices between Friday and Monday, asking the companies why a GST demand shouldn’t be raised. “More pre-show cause notices will follow suit, including from Delhi, Hyderabad and Bengaluru units. These companies now have five to seven days to reply to the notices. Once their replies are studied, show cause notices with GST demand will be raised,” confirmed senior GST official.
The Mumbai DGGI has been investigating RMG apps for more than a year and has sent them notices during the course of the probe. The companies have made representations before the authorities, contesting the GST levied. “However, notices have been served after the recent GST notification, which fixed the GST at 28% on the full face value of bets placed on online games,” said the GST official.
The companies have the option to appeal before the adjudicating authority in the event show cause notices are issued and they don’t agree to the demand raised.