Dream11 Challenges Record GST Notice in Bombay High Court

Dream11, through its parent company Sporta Technologies, has taken legal action in the Bombay High Court against a pre-show cause notice issued by the Goods and Services Tax (GST) authorities. The Directorate General of GST Intelligence (DGGI) recently sent out several pre-show cause notices to online real money gaming (RMG) companies for alleged GST dues amounting to approximately Rs 55,000 crore. Notably, Dream11 received a GST notice for over Rs 25,000 crore, possibly making it the largest indirect tax notice ever issued in the country.

The total GST demand from RMG companies, as raised by the DGGI, is expected to reach Rs 1 lakh crore. The authorities issue an intimation of the tax amount determined as payable through a form called DRC-01 A, which is referred to as a pre-show cause notice in GST terminology. This notice is issued before the department formally serves a show cause notice.

The companies that received these pre-show cause notices include Play Games24x7 and its affiliated companies, as well as Head Digital Works. These notices were issued following a recent change in GST rates for real money games, which increased the tax rate to 28% on the total bets placed at the entry level of each gaming session on such platforms.

In the past month, Spartan Poker also had to make significant layoffs, letting go of 125 employees, which accounted for 40% of its total workforce. Furthermore, real money gaming companies Quizy and Fantok had to cease their operations, with Quizy shutting down and Fantok suspending its activities.