Dream11, other gaming firms face GST notices worth Rs. 55,000cr
The Directorate General of GST Intelligence (DGGI) has issued pre-show cause notices to around 12 online real money gaming companies for tax dues worth Rs. 55,000 crore. As per The Economic Times, Dream11 received the largest notice, amounting to Rs. 25,000 crore. Other firms include Head Digital Works and Play Games 24*7. This move comes after the GST rates for real money games have been increased to 28% on the total bet placed at the entry level.
New GST rule targets online money gaming
The new rule clarifies that tax will be imposed on money paid by users to online games, making no distinction between games of skill and chance. The rule also provides a new definition of "online money gaming." It is defined as "an offering of a game on the internet or an electronic network, and includes online money gaming." Despite dissent from a few states like Goa, Sikkim, and Delhi, the GST Council imposed the highest tax without a vote.
What is a pre-show cause notice?
A pre-show cause notice is served to companies to notify them about the quantum of their dues. This notice is served prior to serving a show-cause notice by the income tax department. Dream11, which has received the largest notice, clocked a net profit of Rs. 142 crore on an operating revenue of Rs. 3,841 crore in FY22. It has filed a writ petition in the Bombay HC challenging the notice given by the tax authorities.
Karnataka HC quashed a record tax notice last year
Last year, the Karnataka High Court quashed a Rs. 21,000 crore tax notice against Bengaluru-based online gaming company Gameskraft Technology, which was then the largest such claim in indirect taxation history. However, the revenue department challenged the court's decision, and earlier this month, the Supreme Court upheld the HC order and decided to hear the matter later this September or in early October. The SC's decision is expected to set a precedent for investigations in online gaming.
Casino operators also under DGGI's tax crackdown
The DGGI is reportedly also cracking down on casino operators for not paying tax. Last week, Delta Corp received a tax notice for Rs. 11,139 crore, along with interest and penalty, for allegedly not paying GST on the gross bet value. The company stated it would pursue all legal remedies available to challenge the action and proceedings.
