Dream11 withdraws plea challenging Rs1,200 cr tax notice

Online fantasy sports company Dream11 on Wednesday withdrew from the Bombay High Court its petition challenging notices related to alleged tax evasion amounting to Rs1,200 crore.

Appearing on behalf of the Maharashtra government, advocate Jyoti Chavan informed a bench led by Justices GS Kulkarni and Jitendra Jain that the state goods and services tax (GST) authority had withdrawn its show cause notice on Dream11 since Central GST authorities were pursuing the matter before the Supreme Court.

Chavan added that the Directorate General of GST (DGGST) would send a fresh show cause notice, which led to Dream11 withdrawing its petition. 

Earlier in September, Sporta Technologies Ltd, which operates the Dream11 brand, had approached the high court seeking to quash the show cause notices issued to the company over a steep GST bill. It had filed the petition against the Maharashtra government. 

The GST show cause notices were issued for the financial years 2017-18 and 2018-19, alleging evasion of the 28% GST on the amount levied for providing gambling services to users. 

Essentially, the gaming firm was asked to pay a 28% tax on its gross value, with the tax authority claiming that the company offered gambling services. The company cited various judgments of the top court stating that online fantasy sports gaming provides predominantly a game of skill that does not amount to gambling.  

The court was also hearing a similar plea by Playerzpot Media Pvt Ltd, an online gaming company that had also challenged show cause notices issued to it by the state tax department and the DGGST. The authorities demanded Rs532 crore in GST with interest and penalty. 

Following changes in the Central GST Act, online gaming, casinos, and horse racing will now be considered “actionable claims” like lotteries, betting, and gambling, making them liable for 28% GST on the full face value of bets. 

However, e-gaming companies noted that this announcement by the Union government on CGST and the Integrated Goods and Services Tax (IGST) rules could cause uncertainty because many states have not yet passed amendments to their own GST laws. 

In September, the Supreme Court stayed the Karnataka High Court’s order on Gameskraft. The high court had in May stayed a show-cause notice for deposit of GST due totalling Rs21,000 crore by Gameskraft. The matter has been pending in the top court for a while now.