The Directorate General of GST Intelligence (DGGI) has taken stringent measures against online Real Money Gaming (RMG) companies, issuing multiple demand and pre-show cause notices for GST dues amounting to approximately Rs 55,000 crore. Leading fantasy sports platform company Dream11 alone has received four GST demand notices totaling over Rs 25,000 crore, marking the largest indirect tax notice served in the country. This Rs 18,000 crore demand includes a tax demand of Rs 6,000 crore and approximately Rs 12,000 crore in interest and penalties.
Dream11's parent firm, Sporta Technologies Private Limited, has challenged these notices by filing a writ petition in the Bombay High Court. The show-cause notice to the company alleges that it failed to pay 28 percent GST on the face value of bets collected between July 2017 and March 2022.
7 pre-show cause notices issued yet
DGGI’s Mumbai unit has issued around seven pre-show cause notices between Friday and Monday, asking the companies why a GST demand shouldn’t be raised. A senior GST official confirmed, “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 demands will be raised,” confirmed a 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.
According to senior revenue officials, the total GST demand raised by DGGI from RMG companies is likely to touch Rs 1 lakh crore.
An intimation of tax ascertained as payable through the DRC-01 A form issued by the authorities, referred to as a pre-show cause notice in GST parlance, 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. A pre-show cause notice raising a demand of over Rs 5,000 crore has also been served to 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 the entry level of each gaming session on such platforms.
A similar notice seeking GST dues of Rs 20,000 crore was issued to Play Games24x7 and its affiliates, including RummyCircle and My11Circle.
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 the fantasy game My11Circle, a competitor of Dream11, and the online platform RummyCircle, a competitor of Gameskraft's 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.
The companies have the option to appeal before the adjudicating authority if show cause notices are issued and they don’t agree with the demand raised.