Dream11 moves Bombay HC against GST notice

Real-money gaming unicorn Dream11’s parent company, Dream Sports, has filed a writ petition in Bombay High Court, challenging the show cause notice issued by tax authorities for alleged goods and services tax (GST) evasion and failure to pay 28 per cent GST on the face value of bets.

Dream11 has over 180 million users on its sports fantasy platform and was last valued at over $8 billion. It reported a net profit of Rs 142 crore in FY22 and an operating revenue of Rs 3,840.7 crore.

The writ petition comes at a time when real-money gaming companies are under pressure after the Supreme Court earlier this month stayed the Karnataka HC’s ruling quashing a GST notice against Gameskraft for alleged tax evasion to the tune of Rs 21,000 crore.

The Directorate General of GST Intelligence (DGGI) had issued the show-cause notice to Gameskraft last year, for alleged indirect tax evasion on a betting amount between 2017 and 2022, which the Karnataka HC quashed.

The SC ruling has paved the way for the GST department to send similar show-cause notices to about 40 gaming companies, including Dream11.

 

Earlier this month, unicorn online gaming company Mobile Premier League (MPL) laid off 350 employees — nearly 50 per cent of its workforce. The company’s co-founders Sai Srinivas and Subh Malhotra said the new rules increase the tax burden by 300-400 per cent.

Other firms such as crypto gaming platform One World Nation, real-money gaming app Fantok, and gaming start-up Quizy have temporarily shut operations.

The online skill gaming sector, with a $20-billion enterprise valuation, $2.5 billion in revenue, and $1 billion in annual taxes, is set to show 30 per cent CAGR to reach $5 billion in revenue by 2025, according to industry estimates .

India’s gaming industry attracted $575 million in investments between 2014 and 2020. In 2021 and Q1 of 2022 alone, $1.7 billion was invested in the online skill gaming sector.

Source::: THE HINDU ,  dated 26/09/2023.