DGGI Drops Rs 55,000 Crore Tax Bombshell On Real Money Gaming Platforms: Report
The Directorate General of GST Intelligence (DGGI) has sent shockwaves through the online real money gaming (RMG) industry by issuing approximately a dozen pre-show cause notices. These notices target RMG companies for an outstanding goods and services tax (GST) debt amounting to approximately Rs 55,000 crore.
The most eye-catching of these notices is a colossal GST demand of over Rs 25,000 crore aimed squarely at Dream11, a leading fantasy sports platform. This is quite possibly the largest indirect tax notice ever served in India.
Industry insiders are bracing for more such notices in the weeks to come, with experts predicting that the total GST demand from RMG companies could soar to an unprecedented Rs 1 lakh crore.
These notices are formally known as "pre-show cause notices" in GST terminology and represent an intimation of tax liability. They are issued prior to the formal serving of a show cause notice by the tax department.
Among the companies slapped with these notices are Play Games24x7 and its affiliated platforms, as well as Head Digital Works, as reported by the Economic Times.
In response to its pre-show cause notice, Dream11 has taken the matter to the Bombay High Court.
The issuance of these notices comes on the heels of recent changes in GST rates for real money games, which have raised the tax levy to a substantial 28 percent on the total bets placed at the entry level of each gaming session on RMG platforms.
One source quoted by ET stated, "While Dream11 has been served a pre-show cause of over Rs 25,000 crore on Monday, a similar notice seeking GST dues of Rs 20,000 crore has been issued to Play Games24x7 and its affiliates, including RummyCircle and My11Circle. A pre-show cause notice raising a demand of over Rs 5,000 crore has been served to Head Digital Works."
Play Games24x7 operates various online games where users can bet on outcomes, including My11Circle and RummyCircle, which compete with Dream11 and RummyCulture, respectively.
Head Digital Works, based in Hyderabad, offers an array of real money games, including A23 Rummy, poker, pool, and fantasy sports.
The Mumbai unit of the Directorate General of GST Intelligence (DGGI) has been actively investigating RMG apps for over a year and had previously issued notices during the course of its probe. Companies have contested the GST levied through representations made to authorities.
However, following a recent GST notification setting the rate at 28 percent on the full face value of bets placed on online games, these new notices have been served.
Companies receiving these notices have a window of five to seven days to respond. Subsequently, show cause notices containing GST demands will be issued.
In the event of disagreements with the demands raised in the show cause notices, companies have the option to appeal before the adjudicating authority.
In a related development, on September 6, the Supreme Court stayed a previous Karnataka High Court judgment regarding a Rs 21,000 crore GST demand against Gameskraft. The matter is scheduled for further hearings in three weeks, with both parties required to submit compilations of judgments and related documents.
On September 16, Gameskraft made the decision to shut down its super app product, Gamezy